You may have heard that it’s a good idea to save about five to six times your salary by age 50 and seven times your salary by age 55.
While there are no one-size-fits-all rules to follow, a nest egg of this size, along with Social Security, allows many people to maintain their current lifestyle throughout retirement.
No matter how much you’ve saved or how old you are today, here are a few things to keep in mind.
Contributions to Tax-Advantaged Retirement Plans
Are you saving at least 15% of your income for retirement? If not, you might aim to gradually increase your contributions by 1% per year.
Once you’re 50, the IRS lets you make larger retirement plan contributions. You can contribute an extra $1,000 to your IRA for a total of $7,000 in 2021, and an extra $6,500 to your 401(k) for a total of $26,000.
Look at what you spend each month on things like groceries, gas and entertainment. Multiply each figure by 12. Your calculations can help you understand the long-term effects of your choices.
It can also help you see how much retirement income you might need to support your lifestyle and whether early retirement could be an option.
Debt and Investments
If you have debt, should you pay it off as soon as possible? How should you balance debt with investments and contributions to tax-advantaged accounts? The answers will all depend on the interest rate, amount of debt and probably several other factors.
We can help you manage your expectations based on your unique circumstances. Do you have questions? Get in touch today.