Income Savings For Your Retirement
It's never too early to start saving a part of your income for your retirement. And there is much inconsistent advice on the percentage of your income to set aside for retirement. Others say to save about 10% to 15%, while some say 15% to 20%. Also, if you think that preparing to save up for your retirement would be that easy, it's time to think again
Though it's better to store 10% of your income than nothing at all, however, you need to calculate a little to know your way around the perfect figures that you need for your retirement.
The Retirement Calculator
First of all, you have to know the timeframe of your retirement. This part may be the least exact estimation because you'll never know how long you're going to live. But this is essential for a starting point in planning your income savings.
Based on research, the average life expectancy is about 78.6 years. Still, there is a possibility that you might live longer, especially if you're a healthy person. Adding to that, according to the Social Security Administration, one in three 65-year-olds today will live past 90, and one in seven will live part 95. After deciding on your estimated life expectancy, subtract the age which you will retire to know the number of years the retirement savings you need.
Afterward, you must measure your estimated living expenses in a year during your retirement. For example, your housing costs (If it's a mortgage or rent), utility bills, groceries, travel expenses, and insurance. Also, you have to consider some payments that might decrease or increase upon your retirement.
Next, after calculating your estimate expenses, multiply it by the number of years of your planned retirement. Then, add at least 3% per year in case of inflation.
The calculation might sound hard, but most retirement calculators will do this for you, so you don't need to work on it manually. The calculator should also show you how much you need to save overall and monthly. And it will be based on your estimated investment rate of return. You can choose to use between 7% and 8% to be optimistic or 5% and 6% if you're feeling more conservative.
Social Security and Pension
If you are expecting other sources such as Social Security or pension, you need to subtract it in the retirement income.
The Social Security benefit depends on your earnings history and the age you began. At the age of 62, you can already claim your social security. However, you won't get the full benefit per check unless you wait to claim it until the full retirement age (FRA), which is 66 or 67 depending on the birth year. If you begin receiving at the period before FRA, you will only get about 70% or 75% of the scheduled benefit check, depending on your FRA.
However, if you are having a hard time calculating the Social Security benefit, you can estimate by making a My Social Security account. Next, after knowing your monthly allowance, multiply it by 12 to get your annual money. After that, you need to multiply the number of retirement years to determine the assumed lifetime benefit. Finally, subtract it from the total estimated retirement expenses.
The shown remainder is the figure that you need to save. And if you think you are not saving enough for your retirement. You can try to increase your contributions, though it may take some lifestyle changes to free up extra money.
Surely, everyone's retirement plan is equally different. And instead of depending on arbitrary numbers, you can take some time to create your personalized retirement plan.
That ends our discussion on how to use and apply trendline analysis in the market charts.
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