The general increase in life expectancy over the past decade has resulted in a burgeoning interest in retirement planning. While many of us may have an idea of where and when we want to retire, the general consensus is that aging adults simply are not saving enough to ensure a comfortable retirement. Why? Well, for one thing there is no magic, one-size-fits-all number—your nest egg depends on your current age, your expected retirement age, life expectancy, current income, risk tolerance and inflation, among other variables.
Still, there are rough guidelines you can follow to prepare for a happy, healthy retirement:
- Your savings target should be around 80-90% of your pre-retirement income
- Your annual withdrawal from your retirement savings should be 6% or less
- Know your assets. Take inventory of your 401(k), IRA assets, potential inheritance income, insurance policies, investments, real estate value etc.
- Don’t take Social Security benefits (if in the U.S.) into account, as these are better conceptualized as a supplemental source of revenue rather than a main retirement funder
- Start early! Experts recommend planning as early as in your 20s. While many of us may be getting later starts, this is a valuable piece of knowledge that can be passed down to children and grandchildren
- Use a retirement calculator to assess your financial security based on various variables including tax rate, life expectancy and rate of return on savings.