2. Pick a number
Set a savings goal. It may change later, but pick a number now to get going. Try to have saved six to nine times your annual household income by your mid-50s to early 60s, says Walter Updegrave, at Real Deal Retirement.
That means, if your household earns $56,516 — the median household income in 2015 according to the latest Census numbers — make your goal six to nine times that amount: $339,000 to $508,500. Yes, it seems vast. You may not quite get there, but you’ll be better prepared for retirement than now.
Look at it another way: How much will you need saved to live in retirement on 70 percent of your current monthly income? Voya’s (formerly ING) simple retirement calculator shows that if you earn $56,516 yearly and retire at 65:
- A nest egg of $339,000 lets you withdraw about $1,835 a month ($22,020/year) if your savings grow at 5 percent a year.
- A nest egg of $508,500 would let you withdraw about $2,753 a month ($33,036/year) if your savings grow at 5 percent a year.
Take note: Don’t treat retirement calculators as the gospel truth. As Money Talks News founder Stacy Johnson points out, many are “click bait,” meant to entice you into making a purchase. At best, they’ll give varying answers, depending on their assumptions and the questions they ask you. There’s a danger you’ll get a false sense of security from the numbers. That’s why it makes sense to use several calculators, stay skeptical about their results, and update your savings goal as you learn more.
Photo credit: Getty