How much do you really need to save for retirement?
Use these insights from a Bank of America strategist to help determine if your retirement strategy is on the right track.
Retirement experts have offered plenty of rules of thumb about how much you need to save: somewhere near $1 million, 80% to 90% of your annual pre-retirement income, or 12 times your pre-retirement salary. But what’s right for you? And how do you know you’re on track?
“Because there are so many variables, even the retirement researchers can’t agree on a total dollar amount,” says Ben Storey, director of Retirement Research & Insights at Bank of America. “What each person needs will vary widely based on a number of factors.” These factors include your current age, and the age at which you plan to retire or could be forced to retire due to declining health, the loss of a job, or other circumstances beyond your control; how long you expect to live based on family history; how much you plan to spend in retirement, and what your sources of retirement income will be.
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Emergency savings of at least three months’ living expenses should be your first goal, before you even begin thinking of saving for retirement.
Fidelity indicates that you should have one year’s salary tucked away in retirement savings by the time you reach age 30.
The average retirement savings for people age 38 through age 43 is just shy of $62,000, increasing by about $100,000 for those from age 56 to 61.
Experts indicate that you should have $1 million set aside by retirement time, but the average for people in their fifties is significantly less.