There will come a time when retirement arrives. Those who lived a carefree life and squandered their money may discover retirement to one difficult financial situation after another. Persons who saved for their retirement are going to live much more comfortably.
In order to live the best possible life in retirement, adequate savings must be put away. “How much money should be saved?” is the question asked.
The answer is “Save as much as possible and avoid needlessly throwing money away.”
The Age Factor
The more one saves at an earlier age, the more one will have in retirement. That said, a younger person could get away with saving less since he/she has many more years until retirement. Someone who is 44 years old and has very little retirement savings really needs to cut spending and save as much as possible. Time is limited for a middle-aged person.
The Annual Percentage
Overall, saving 10% to 20% of annual income could be adequate to retire comfortably. Cutting back on spending in retirement and focusing on necessities would make things easier. Avoiding debt, especially credit card debt, further increases the chances of saving money in one’s retirement years.
The Simple Truth of Retirement Savings
Saving for retirement has to take a few basic things into consideration. Money clearly has to be put aside in order to cover living expenses. This is obvious. What is somewhat overlooked is the need to adjust savings for the rate of inflation.
In 20 years, what costs $1 today may cost $2.15 or more. Putting $1 away in a money market account at 0.4% interest is not exactly going to help address inflation. Putting all one’s savings into a high-risk investment that leads to a 40% decline in net worth would be a total disaster.
So, the amount of money saved for retirement needs to be safely invested as a means of addressing increases in prices due to inflation. All this starts with devising a projected budget for the future. Having a clear idea of how one wishes to live in 20 or 30 years assists with adjusting the necessary planning required to yield results.
Advance Planning for Retirement
No one can predict what the future holds in store, but careful planning for the future definitely makes things more stable. When buying a home, there is an expectation real estate taxes, insurance, and other costs are going to go up in the future. While the possibility exists prices may decrease, the possibility is slimmer than the potential for increases.
The increases are, doubtfully, going to be 100%. In other words, real estate taxes are not likely going to go from $3,000 a year to $6,000 per year in two decades. Such a massive increase would lead to people moving out of a state at a massive rate. A 10% increase might even be deemed a little bit too high, but planning on a 15% increase could lead to gaining a “cushion” of savings able to handle the increases in property taxes.