When it comes to retirement planning, the general rule is that you can never have enough savings. Certainly, financial advisors would say that they’d rather see their clients save more than they might have expected to need, rather than finding out too late that they’ve come up short.
To that end, many people may wonder how much, exactly, they should start saving for retirement in order to fully fund a comfortable post-career life. In general, the rule of thumb is that people should plan to make about 75 percent of their final salaries annually over the course of their retirements, so for instance, if the amount they make in their final year of work is $80,000, they should aim to have about $60,000 coming to them each year after that.
A simple rule to follow
So when it comes to exactly when they should start their savings efforts, the answer is, “As soon as possible.” Again, the sooner a person or household is able to start putting at least a few thousand dollars a year toward retirement, the sooner that money starts accruing interest, making savings efforts early on – when they’re likely to be making and therefore contributing less – more valuable over time.
That’s the idea many retirement advisors now try to impress upon millennials in particular, according to a report from financial news site The Street. This is a generation that was largely put behind the eight-ball by the economic downturn. Around that same time was when many millennials, now in their late 20s and early 30s, were first starting to graduate from college, and even older ones might have been significantly set back in their savings efforts.
That is to say that many may not have been able to get a job in the first few years after they graduated, and even those who did have jobs often lost them, and had to dip into their savings to simply keep paying for their financial necessities.
What’s the good news?
However, it’s important to note two things here, the report said. First of all, while many might expect that millennials are still making little to no effort to fund their retirements even now – after years of economic recovery – a lot of young adults are actually working diligently to prepare for retirement in this way. And second, even those who haven’t started yet will still have three-plus decades of savings time if they start in the near future.
Again, it’s never too early to start saving, but millennials may have another issue to deal with as they go forward. The vast majority of people now in the nationwide pool of workers will almost certainly have to work beyond the traditional retirement age of 65 to make ends meet. In the past, it might have been perfectly wise to retire at 65, because life expectancies were lower, the power of each dollar invested was greater, and so on. Further, because people tend to stay in better health as they age these days, let alone a few decades from now, working into their 70s may simply appeal to more people as well.
However, all of these issues are things that people should discuss with their financial advisors not only now, but on an ongoing basis. This can help determine the ways in which they’re hitting their benchmark goals as the years go on, and shift their savings strategies accordingly.
To learn more about when and how to start saving properly for retirement, feel free to contact First United Bank & Trust online at MyBank.com/contact, by phone at 1-888-692-2654 or by email at customerservice@MyBank.com.