When you begin your career, your goal is to excel in your field and become a skilled professional. So, during the initial stages, retirement savings may not be on your mind. In a survey by Bankrate in September this year, the shocking finding was that 25% of the American workforce hasn’t contributed a dollar to their retirement account for more than a year.
Building a retirement saving portfolio should be your top priority regardless of your age. The earlier you begin, the more you can save to enjoy a comfortable retirement life. And you can opt for early retirement too once you’ve met your retirement saving goal.
First, it’s important to know how much savings for retirement. CNBC recently published a helpful article to guide workers. So, let’s find out how much do experts recommend saving for retirement.
How Much Should You Be Saving for Retirement?
Financial experts have created benchmarks for average retirement savings by age. Regardless of your income, you can benefit from these milestones and work towards a secure financial future.
- By age 30: 1x of your annual income
- By age 40: 3x of your annual income
- By age 50: 6x of your annual income
- By age 60: Save 8x of your annual income
An average American thinks they need $1 million+ to retire comfortably. But it’s okay if you’re behind on this scale.
The age-based saving milestones may seem extremely challenging to meet. But you’re not alone. In fact, 45% of Generation Z employees and the same percentage of millennials believe they are far behind on their retirement saving goals.
Start Saving for Retirement: It’s Not Too Late!
It’s never too late to start saving for retirement. But before you begin, it’s a good strategy to set goals. Then do some research about saving plans and investment in avenues that best meet your needs.
Find out how much you would need in your savings account. If you want to maintain the same lifestyle after retirement, you need approximately 80% of your income every year. You can either save the amount in your bank or invest in profitable avenues to generate passive income after retirement.
When you start saving, you can set aside a small percentage of your monthly income. It can be as small as 2-5% of your total income including salary, business profits, or dividends. This will help you build healthy financial habits. Then keep increasing the contribution by 1% or more per year as per your budget. However, if you start saving when you’re close to retirement age, try to start saving 10% or higher of your income.
Further, you should look into passive income ideas that can help generate additional income. Thus, you can increase your savings and reach your retirement goals earlier than planned. Isn’t it exciting? Let’s take a look at some ideas that can help you during your journey:
- Invest in stocks and bonds
- Write a book and sell it online
- Create a paid online course for Udemy, Skillshare, or other digital platforms
- Real estate is a good long-term investment option
- Become a silent partner with a small business owner
Conclusion
In short, it’s crucial to save a handsome amount for your retirement years. This way, you can continue to have a peaceful and comfortable life even when you stop working.
Many people want to know about how much saving for retirement is necessary. Unfortunately, around a quarter of the American workforce is behind on their retirement savings goals. The main reasons are rising inflation, lack of pay parity, and increasing cost of living.
However, you should prioritize building a retirement saving portfolio even if you’re in your early 20’s or 30’s. With smart saving goals, you can save more for later years.
The journey to a secure retirement revolves around starting early, setting realistic goals, and exploring additional income streams. By taking proactive savings steps and leveraging investment options, you can pave the way for a financially sound and fulfilling retirement. Remember, it’s never too late to start securing your future.