If you are asking yourself, “How much do I need to save for retirement?” — keep reading. Determining how much to save can be difficult, especially if retirement is a long way off. Read on to see how much the experts recommend you save for retirement and find a few solutions to get on the right track.
Here are two ways to estimate how much you will need to save for retirement:
1. The 4% Rule
Many financial experts recommend the 4% rule. This method proposes that you should save enough to be able to withdraw 4% each year in retirement to cover your expenses.
Put another way, you should save 25 times your current annual spending in a retirement savings portfolio.
2. Partial Replacement Theory
Another savings strategy is the partial replacement theory. Proponents of this approach recommend aiming to replace 70% to 90% of your annual pre-retirement income with your retirement savings.
For most people, that can be achieved by saving about 15% of your income for retirement throughout your working years.
To determine how much you will need to save for retirement, start by tallying up your current monthly expenses. Make sure you factor in all of your automatic online payments as well as daily expenses for food, gas, shopping and leisure activities.
Add these to mortgage payments, utilities, costs for children’s education, car payments, insurance and medical bills.
The sum of your expenses may look like an intimidating number, but remember that some of these expenses will go away or change by the time you reach retirement.
For example, by the time you retire, you may have paid off your car payments and mortgage. And food expenses and utility costs may decrease as your children move out of the house.
Last, don’t forget to deduct your current rate of retirement savings from your anticipated retirement needs.
Those adjustments account for the recommended goal of saving 70% to 90% of your current income to meet your needs during retirement.
Now that you know how much you will need to save for retirement, Synchrony Bank can help you tackle your goals.
When you are ready to plan for retirement, call Synchrony Bank at 1-844-345-5789. Our retirement savings products can help you reach your goals with rates that surpass the national average+ and a wide selection of award-winning financial products to build your next egg.
NerdWallet: Retirement Calculator
+National Average APYs are based on specific product types of top 50 U.S. banks (ranked by total deposits) provided by Informa Research Services, Inc. CD Rates: Average APYs are based on certificate of deposit accounts of $25,000. High Yield Savings Rates: Average APYs are based on High Yield Savings Accounts of $10,000. Money Market Account Rates: Average APYs are based on Money Market Accounts of $10,000. Although the information provided by Informa Research Services, Inc. has been obtained from the various institutions, accuracy cannot be guaranteed.
*ANNUAL PERCENTAGE YIELD (APY): All APYs are accurate as of 07/09/2018.
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For Money Market and High Yield Savings Accounts, the rate may change after the account is opened. For CDs, a minimum of $2,000 is required to open a CD and must be deposited in a single transaction. A penalty may be imposed for early withdrawals. After maturity, if you choose to roll over your CD, you will earn the base rate of interest in effect at that time. The APY shown for CDs and IRA CDs is for a 60-month CD with a balance of at least $25,000. Click here for all CD rates and terms offered.