“How much do I need to save for retirement? ” According to BBC news, this question haunts innumerable people like us. Read below to know how to save till you retire. Experts advise employees to save an amount equal to their annual income of one year by reaching 30. Here’s how individuals can do that. When you start earning, save 20% of your savings and survive on the remaining 80%.
Often, it’s found that people hate being in debt and therefore try to repay the debt, sometimes aggressively, even if it’s not required. So while clearing off debts is no doubt important, it’s also essential to save for your future.
Save your annual salary thrice by age 40
By the time one reaches 40, one should come up with a well-devised retirement savings strategy. According to expert recommendations, employees must save the amount of their annual income thrice at age 40.
With an increase in their salary, people tend to increase their expenditure, sometimes unnecessarily. This tendency prevents them from improving their financial condition. However, wise people continue to lead the same lifestyle even after receiving a raise and invest the difference.
Save up to five times your annual income by age 50
While some experts advise employees to save five times their income per year, some stress saving up to six times. Find you don’t have enough savings for your retirement because of other expenses. You can follow a ” catch-up contribution” scheme, which advises people to make an extra contribution to any tax benefitted retirement account every year once you turn 50.
Additionally, Walsh advises employees to check the fees they pay for their retirement account. A fee of 1% or 2% per year might sound less, but it amounts to $5000 or $10,000 respectively if a person has a savings of $500,000. Instead of paying this extra amount, Walsh suggests investing in an active product so that individuals can buy and sell investments without having to pay commissions.
Follow the 7x saving resolution at age 60
By the time one reaches 60, one ought to have seven times the annual salary in the account. If you have any outstanding debt to be cleared, now is the time to do so. Don’t exceed your standard of living during this time. Pay off your bills on time. Don’t forget to pay off high-interest credit card debt and maintain a high credit score.
Remember that five years before retirement is considered to be a red zone. Therefore, no retirement investor can afford any major downturn in the last five years before retirement.