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Retirement Planning

October 11, 2019
couple retirement planning

7 min read

We all fantasize about the day we’ll be able to hang up our hats and retire, affording us plenty of time to do what we love. That may mean traveling, spending time with family, or even catching up on a neglected reading list. But whatever you imagine for when you retire, making it a reality requires long-term planning.

Retirement planning requires developing specific ideas for your retirement lifestyle and then determining how much that lifestyle will cost. What’s more, since you probably won’t be earning a paycheck, you need to know where the income to pay for your lifestyle will come from.

The amount each person needs to have saved for retirement is different, and depends on factors like their health and where they live. Some experts suggest having a nest egg of over $1 million if you expect it to generate enough money to live on. Others recommend having the equivalent of 10 to 12 times your current annual income in savings.

When to start saving for retirement—and how to boost savings over time

Even if retirement is decades away, it’s important to start saving for it early. If you’re in your 20s, you may not know what your retirement goals are yet, but you can still start putting money aside for future goals.

Younger workers may not have as much available to save as those who’ve been in the workforce for a long time. But they do have time on their side, allowing the opportunity for savings to grow longer. Slightly older workers may be further along in their careers, allowing them to put more into savings each month.

How much you should be saving for retirement can depend on your age and where you are in your career. And while there’s no one way to do it, thinking about how to plan for retirement by decade can be helpful in moving toward long term goals. For example:

If you’re in your 20s: Aim to put at least a modest amount of your paycheck into savings every week or every month. Don’t worry if you can’t put away the often-suggested 20 percent. Even a few dollars a week may grow over time when invested in an IRA or high-yield savings account, for example. In the meantime, work on paying down student loans and other debts.

If you’re in your 30s: You’re likely to be a bit more established in your career and may have a little more income to put away regularly. As your income increases, make sure your savings increase proportionately. Consider having a portion of your paycheck automatically deposited into your savings account each month, so you don’t have to think about it.

You may also now have some assets that will become part of your retirement strategy later on, such as a house, or shares in the company you work for.

If you’re in your 40s: Hopefully by now you’re well-established in your careers and are starting to see your savings grow significantly as you move into your peak earning years. This is also the time to make sure you’re keeping track of your debts. If you pay off debts in your 40s, such as student loans and credit card debts, you can spend the later part of your career saving as much as possible.

This may be a good time to put any extra income, such as bonuses, toward paying down debt. By your 40s, experts recommend having six to 10 times your current salary put away in savings.

If you’re in your 50s: Retirement planning may become your primary financial focus, and you may start to have an idea of what your yearly retirement income needs will be.. This shift may mean making final mortgage payments and taking advantage of higher contribution limits to retirement accounts, such as 401(k)s and IRAs. By your 50s, experts recommend saving approximately 25 times your yearly retirement income needs.

If you’re in your 60s: Compare your projected living costs and your expected retirement income and see if it all adds up. If it doesn’t, you may need to adjust your expectations for retirement, save more, or maybe even plan to keep working a little longer. Many people continue working well into their 60s, allowing them to grow their savings and keep their employer-sponsored health insurance until they’re eligible for Medicare.

Understanding the cost of retirement

Having a great saving strategy is only the first step in planning for retirement. The second step is figuring out how much you’ll need to live on when you’re no longer working. Even if retirement is a long way off, try envisioning what you’d like your retirement to look like.

Will you want to travel or spend more time with family? Will you spend winters in a warmer climate? Do you want to downsize? Or maybe you want to buy a second home.

Once you understand what your goals are, do some research and figure out what your particular vision might cost per year. Conventional wisdom suggests that you’ll likely need somewhere between 80% and 100% of your pre-retirement income. Where you fall on that spectrum will depend on your goals and personal situation. Some expenses to consider include:

Sources of retirement income

Once you have a sense of how much money you’ll need to live once you retire, determine where the income to pay for those expenses will come from. For many people, potential income sources include:

Turning your retirement plan into a reality

Once you have long-term retirement goals and an understanding of potential income sources, it’s time to put your savings plan into action. Look at how much savings you’ll need in order to retire, and figure out how you’ll get there.

Online tools like Stash’s Retirement Calculator can help you keep track of how much you’ll need to retire. Enter information, including your age, salary, how much you’re saving, and your estimated retirement age to see how close you are to achieving your retirement goals. Revisit your savings goals as your circumstances change, and adjust your plan as needed. For example, you may need to:

Whatever you decide, to learn more about building your future and saving for retirement, visit Stash Retire.

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By Stash Team

Disclosure: Nothing in this article should be construed as tax advice, and is for educational and information purposes only. Stash does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. You should consult with a tax advisor for additional questions.

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