Will your savings be enough to see you through retirement? This is a key question in planning, but many people still don’t know how to determine the appropriate amount they need to accumulate for a retirement-worthy nest egg.
Financial planners often recommend that you save between 10% and 15% of your income for retirement, beginning when you are in your 20s. But what if you are older? How do you know how much you will need then?
Saving between 10% and 15% is just a general guideline. When talking about your specific retirement, it pays to consider more personalized numbers. Another guideline, promoted by J.P. Morgan Asset Management, involves looking at your age and income together.
For example, if you are age 55, and your annual income is $50,000, J.P. Morgan recommends you have 4.7 times your income saved ($235,000); if your annual income is $100,000, have 6.9 times your income saved ($690,000); and if your annual income is $150,000, have 8.1 times your income saved ($1,215,000).
The main concept is to factor age and income into your retirement planning because they are the significant factors that will determine how much you need to live comfortably at your current lifestyle when you retire. In other words, when you start saving and how much you make are just as important (if not more so) than tucking away a flat percentage each month.
Of course, how you will achieve and grow your savings is another topic. Depending on your situation, we might recommend diversification or other strategies.
And remember, these are just broad guidelines. We can help you decide if your current savings numbers are on point based on your circumstances and goals.