How Much to Save for Retirement in 2024
Retirement planning is a complex process, but it’s something you truly can’t afford to ignore. If you’re over the age of 25, you should already be putting money away for your retirement. The closer you are to your retirement age, the more aggressively you need to save. Here’s a quick guide to managing your retirement savings in 2024.
General Benchmarks for Retirement Savings
There’s no one-size-fits-all plan for retirement investing, but there are some benchmarks that you can aim for to give you a solid savings plan. In general, you should plan to have saved:
- The equivalent of a year’s income by age 30.
- Twice your yearly income by age 35.
- Three times your yearly income by age 40.
- Four times your yearly income by age 45.
- Six times your yearly income by age 50.
- Seven times your yearly income by age 55.
- Eight times your yearly income by age 60.
- Ten times your yearly income by age 67.
These recommendations are made with the assumption that you’ll put over half of your retirement savings in stocks throughout your lifetime and retire at age 67.
How Income Effects Your Retirement Plan
The more you earn, the more you’ll need to put away in your retirement savings if you want to maintain your current lifestyle. Your Social Security benefits are based on the amount that you earned over your working life, but they top out at a certain amount.
If you have average indexed monthly earnings of $9,990 and retire in 2024 at age 70, you’ll receive $4,873 in Social Security benefits each month. This probably isn’t enough to maintain your previous lifestyle if you were accustomed to bringing home more than twice that amount. This is where your retirement savings come in.
The savings goals listed above are a good starting point, but if you earn over $150,000 a year, you should increase these numbers. If you make $200,000 a year, strive to have 2.7 times your yearly income in retirement funds by age 35 and have almost 11 times your yearly income saved for retirement by age 65. If you earn $300,000 a year, increase this to 3.2 times your yearly income by age 35 and 12.2 times your yearly income by age 65.
Plotting the Retirement You Want To Have
Carefully consider the type of retirement you’d like to enjoy so you can adjust your savings plan accordingly. There are several key factors that will influence your approach to retirement savings.
Retirement Age
The earlier you retire, the more savings you need. You can start receiving Social Security benefits as early as age 62, but you won’t get your full benefits if you cash in early.
If you were born in 1957 or early 1958, you can start receiving your full retirement in 2024. The full retirement age for those born in 1957 is 66 years and 6 months. For those born in 1958, it’s 66 years and 8 months. If you were born in 1960 or later, the full retirement age is currently 67 years. However, if you wait till age 70, you’ll receive more.
If you take your benefits early, your Social Security payments are reduced by as much as 30%, depending on your exact age. Your benefits are also reduced if you’re working while receiving Social Security payments before full retirement age. To compensate for this, your total retirement savings should increase.
Living Expenses
As a general rule of thumb, you should expect your retirement living expenses to be 70% to 80% of your pre-retirement income. This accounts for a slight decrease in your spending since you’ll no longer need to pay for work-related expenses such as lunches out, work attire, dry cleaning, and a daily commute. However, this simplified estimate doesn’t account for the many other factors that could increase or decrease your retirement expenses.
If you plan to enjoy a lavish retirement with extensive travel, membership of an exclusive country club, and lots of entertainment, then you’ll need a larger retirement fund to afford these pleasures. If you plan to enjoy a quiet retirement at home, you may need far less than you’re currently spending. Perhaps you’ll have your home paid off by the time you retire, or you’ll sell your current home and use the income to downsize and purchase your retirement home with cash. This can greatly reduce your annual living expenses by erasing your mortgage payments.
Carefully consider the retirement lifestyle that you want to live and adjust your financial planning accordingly so you can enjoy the retirement you’ve always dreamed of.
Extra Purchases
Are you planning to make any major purchases in your retirement? Perhaps you want to buy an RV and take up life on the road or finally get that boat you’ve always dreamed of. If you’ll be making payments on these purchases, you’ll need to factor it into your monthly expenses during your retirement.
A skilled financial planner can also help you calculate the impact of other major expenses, such as gifts to family members or donations to charity made in your later years. Done correctly, you can make these contributions tax-free, which helps you allocate your extra funds more effectively.
Health Care Needs
It’s not always possible to fully anticipate your future health care needs, but you may have an idea of likely expenses based on your current health and that of aging family members with similar genetics. If you suffer from chronic health conditions, you’ll need to budget for these and anticipate rising health care costs.
You should also consider whether you may need assisted living in the future. If you live with a younger family member or plan to in the future, this may not be a concern. However, if you intend to live independently, you should budget for future assistance.
Achieve Your Goals for Retirement Savings in 2024
Whether you’re right on track or a little behind, it’s possible to achieve great results with your retirement savings in 2024. At Pasquesi Sheppard, we offer a variety of financial tools to help you build a solid retirement savings plan. Contact us today to learn how to protect your future.