With an eye on your retirement years, you need to start preparing as early as possible. You also have to decide exactly what your retirement goals are to help you figure out how to make them happen. You may hear conflicting advice in the financial arena, from putting away 10 percent of your take-home salary to a higher cut.
Make Your Goals
Before you can begin a savings plan, determine your goals. Decide what percentage of your salary you want to retire on – 80 percent is a common goal. You also need to decide what age you want to retire – 65 has been the standard, but you could adjust this goal higher or lower. A final factor to your retirement savings is the percent of return from your investments. The Center for Retirement Research at Boston College asserts that a 4-percent return is average.
The earlier you start to save for retirement, the lower the percentage of salary you’ll have to sock away. According to authors of the brief “How Much to Save for a Secure Retirement,” starting your savings plan at age 25 – instead of 45 – slashes your required saving rate by two-thirds. Steve Vernon, of CBS News, estimates that starting to save at 25 will require a 7 percent saving schedule if you want to retire at age 70 and a 12 percent saving schedule if you want to retire at age 67.
Use Calculating Tools
There are a variety of calculating tools available online to help you make plans and assess your progress. Use these plans to help you get started with your retirement savings and then check your progress with the tools, too. Visit the CNN Money website to calculate what you need to save – enter your age, annual salary and current savings and you’ll get results for retiring at age 65 at 80 percent of your current income. Visit the Vanguard website to use the retirement income calculator to figure out how much income you’ll need in retirement and whether you’re on track to save it. The Vanguard website also has a contribution increase calculator. You can experiment with the sliders in the tool to see how much savings you’ll have if you make adjustments to your savings schedule. The T. Rowe Price website has a retirement income calculator that helps you figure out how much you’ll have to spend in retirement and how long your funds will last.
Readjust When Possible
Reassess your progress annually to make sure you’re on track. Use the calculating tools to gauge your current savings and your goals. Don’t forget that as your salary increases through the years, you should increase your savings percentage, too. This can be an effective way to compensate for an unexpected layoff or a health issue that curbs your earnings for a period of time. If you find that you’re not on track to meet your goals, readjust with a higher percentage.
Kathryn Hatter is a veteran home-school educator, as well as an accomplished gardener, quilter, crocheter, cook, decorator and digital graphics creator. As a regular contributor to Natural News, many of Hatter's Internet publications focus on natural health and parenting. Hatter has also had publication on home improvement websites such as Redbeacon.