Are your retirement savings goals on target? There’s no one-size-fits-all answer, and the age you retire can have a huge impact on the amount you need to save. Retirement experts at Fidelity Investments say that to retire by 67, you need 10 times your income saved. But if you retire at 55, you’ll need much more than that.
According to research from the TransAmerica Center for Retirement Studies, the median retirement savings of baby boomers totals $202,000. This may seem like a lot, but based on the 4% rule, this would yield a retirement income of $8,000 per year. On average, U.S. households between the ages of 55 and 64 spend over $78,000 on a variety of expenditures, per data from the Bureau of Labor Statistics.
In an interview with Travel + Leisure, financial wellness educator Danetha Doe said that if you retire at 55, you need enough money saved to cover 20 years or more of living expenses. For example, Doe said she suggests taking your current salary or salary before retirement and multiplying it by 10. If your salary was $80,000 per year, that means you’ll need $800,000 to retire. Over 20 years, this breaks down to $40,000 per year. For some people, this may not be enough, Doe said.
“My suggestion is to use the formula to set a baseline. Then, do research on what it would cost to live the lifestyle you wish to experience in retirement,” Doe explained.
You still have options if you don’t have enough saved to last you throughout retirement.
You can always jump back into the workforce to supplement your retirement income or reduce your expenses as much as possible. You can downsize your home to reduce monthly mortgage payments and property taxes, cut back on subscription services or sell unused vehicles. You can also take advantage of catch-up contributions. The IRS lets savers over the age of 50 make additional contributions to retirement accounts. For 2023, the contribution limit is $7,500.
If you haven’t claimed your Social Security benefits, consider holding off at least until you reach full retirement age. For each month you delay benefits, you increase your benefit amount by a certain percentage. You’ll receive the most if you postpone benefits until age 70.
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