Retirement is something millions of people look forward to throughout years of toiling away at the workplace. But while most people think about retirement, many don't ever think about how much they'll need to save. Of course, you'll need enough money to feed yourself, pay your bills and cover your medical costs. You might even want to invest or go on that vacation you've been planning your whole life, but you never really have the time to do. But retirement is coming for us all, and the best time to think about it is now. So if you are concerned about retiring, or are getting ready to retire as you should, it's time to think about the big question: how much do you need to retire?
Unfortunately, the answer is not as simple as you would hope. There is no one-size-fits-all number to address this question, although Fidelity Investments, the online trading broker, provides a rule of thumb that says you should save eight times the amount of your ending salary. That means if you have a salary of around $80,000, you would need around $640,000 saved for retirement. Their rule of thumb also assumes that you plan to save and invest. But more accurately, the amount of money you will need to retire will depend on a number of factors that you must take into account.
The two most obvious factors to consider in the amount you need to save would be your current age and the age you plan to retire. We're sorry if this sounds a bit morbid, but it's the reality of the situation and part of simple mathematics. With this information you can figure out how much time you have to save and how long you'll live off your retirement savings. Of course you can't predict how long you are going to live, but it's better to guess too high than too low, because it will have a tremendous impact on how much you'll have.
Figuring in what you plan to buy and invest in with how much you can save will help you come up with an even more accurate number. You should also take into account how much retirement pension you will receive, and how much social security you will receive. You can calculate social security income by checking out the Social Security Administration website to see your annual statement. As for pension, you can inquire an estimate from the company you work for. You may also acquire assets from inheritances or the sale of a business. Additionally, you'll have to factor in how much money you still owe from mortgage and other loans at the time of retirement. If you plan to sell your home and buy another, you'll need to factor that in too.
So considering all these factors together, coming up with an appropriate number might seem a bit overwhelming to some, with lots of room for error. To help you calculate how much you will need to save, there are many retirement savings calculators available online that you can use. Calculators like the one at CNN Money, Kiplinger or AARP can help you come up with a decent estimate in today's dollar value.Though it's better to start saving as early as possible, it's never too late.