Charlie Eissa is a retirement planning expert in the financial sector. His knowledge in the field helps make retirement planning more manageable for seniors. In the following article, Mr. Eissa discusses how much money individuals should plan to save to successfully retire without worry.
Retirement seems so far away until it’s right around the corner.
It’s a dream, but also a doable goal. Still, many are worried that they simply won’t be able to retire comfortably through savings. Around 48% of American workers feel that they aren’t bringing home enough cash to save properly for retirement.
More alarming is that 22% have saved less than $5,000 for retirement and the 15% who say they have nothing saved at all reports Charlie Eissa.
The truth is that with a solid retirement plan and consistent savings, one can retire with ease and not worry about struggling financially. After decades of hard work, it’s much deserved.
The More, the Better
Just as there’s no one way to save for retirement, there’s no one consensus on how much exactly should be stocked away explains Charlie Eissa.
The most common factor: savings. There needs to be substantial reserves and saving should start early.
One common guideline according to Charlie Eissa is needing to have about 80% of one’s income once you retire. For example, if yearly expenses are $65,000 before retirement, target $52,000 to follow the 80% rule.
Different Retirement Routes
Charlie Eissa says that another approach is looking at a salary before retirement and saving 10 times that figure. Many retirement advisers swear by the 4% rule. This means a retiree should divide the amount they want to live on when retiring by 4%.
For example, if a yearly retirement income goal is $80,000, the nest egg should be $2 million. It’s a somewhat riskier strategy. Charlie Eissa says that the rule works best if one expected to retire for 30 years, so those who live longer will need a retirement financial portfolio to last longer, too.
There are, however, additional options. Charlie Eissa says that people should begin saving for retirement in their 20s, targeting 15% of their gross salaries. Financial advisors often recommend setting retirement savings milestones or benchmarks along the way.
Targets include retirement savings of 1x an annual salary by the age of 30, or 3 times an annual salary by the age of 40, and 8 times a salary by 60.
Think About the Future
Retirement isn’t a one-size-fits-all financial plan. Retirement needs are highly personal. It largely depends on one’s income, but there are also financial goals, spending expectations, and the desired retirement lifestyle to consider.
It’s impossible to gauge how long one will live, but an estimate is essential to making sure savings are adequate explains Charlie Eissa. Most people retire at or around the age of 65. Men, on average, live to 83, while the average woman lives to 85 ½.
Generally, financial planners recommend planning for a retirement that will last somewhere near 25 years.
The next step is pinpointing a target amount for what’s expected as far as retirement spending. Will there be a lot of traveling? Will there be a mortgage or housing expenses? Is there a plan to take another full-time or part-time job?
How much is usually spent on food, clothes, and transportation right now? All are important to consider. Perhaps most important is the estimated cost of health care says Charlie Eissa.
Income may increase during retirement, by halting retirement savings, reducing expenses, especially commuting and other transportation needs. Some retirees have successfully paid off their mortgages before retirement as well.
Retirement Income Sources
Even though one’s main income vanishes post-employment, there are other sources of income to expect. Social Security will substitute once-steady income streams.
Though Social Security was designed to make up for 40% of an average pre-retirement income, something to keep in mind is that Social Security benefits are usually lower-than-average for retirees on the higher end of the income spectrum.
Though rarer these days, job pensions may impact how much is needed to save. There’s also the possibility of survivor and joint annuities.
But the most money will be acquired from personal retirement savings, whether it’s an employer-funded 401(k), an IRA, or a health savings account.
Reserving these funds for retirement is key; many come with penalties if there are early withdrawals. People with traditional forms 401(k) or IRA, usually must take out RMDs, required minimum distributions, when they hit 72 years old.
Roth IRAs are also popular and do not come with RMDs. At the age of 59 ½, money can be taken out of a 401(k) or an IRA without penalties, which is a huge plus for early retirees explains Charlie Eissa.
The Successful Retirement Bottom Line
Retirement is an exciting time — if there’s adequate preparation. No matter the post-retirement goals and plan, be sure to save often, save as much as possible, and adjust as the years roll on to fit financial goals.
Then live the good life.
