If you’re wondering how much to save for retirement, you need to examine your present budget and plan for what you’ll need in the future, when you aren’t actively working. Many financial experts recommend that you maximize the amount you are saving by taking advantage of any 401K plans available from your employer. This is a good place to start, but don’t be afraid to incorporate additional savings plans to ensure you have everything you need during retirement.
First, figure out how much of your current income you can put aside and invest for retirement. Put everything you can into your employer-sponsored 401K plan, especially if your company matches. You don’t want to leave retirement dollars on the table. Once you have done that, look at other places in your budget where you can save a few extra dollars. Put that money in other investment vehicles, or if you want to keep it liquid, open a simple money market account.
As you’re deciding how much you can put aside right now, do a bit of math to establish what you’ll need when you retire. Consider where you’re live; whether you will rent or buy a property or stay in the house you’re presently living in. Perhaps you’ll move to a place with a lower cost of living. Calculate what you’ll need to cover health care expenses, food, travel and other activities you plan to enjoy in your retirement.
It’s a good idea to be conservative when estimating how your retirement investments will perform. When you’re planning how much to save for retirement, it’s much better to end up with more than you expected instead of less. Even if the stock market is performing well and you are confident of your return rate, adjust your projections for any possible downturns that will affect your retirement planning.