Many of us tend to delay planning for our retirement, even though we know that we won't have a steady income once we retire. However, experts warn that delaying our retirement savings and prioritizing pleasure and comfort in our younger days can result in a financial crisis in our retirement years. To avoid such a scenario, it's crucial to start planning early for our retirement and begin saving as soon as possible.
Retiring at 60? How much to save
Determining the amount required for a comfortable and happy retired life is subjective and depends on individual perceptions, expectations, expected income, estimated inflation, expenses and debts, and the expected lifespan. However, financial advisors propose certain general guidelines to establish a benchmark target to help individuals achieve a comfortable and relaxed lifestyle during retirement.
Also read: How to save for your retirement
"One theory suggests that saving 15% of one's annual income every year (including employer's contribution) can be appropriate for many. Another popular theory says the ideal corpus for retirement should be 7-8 times one's salary by the start of one's 60s. According to the 30X rule of retirement, for a comfortable retirement, the total savings should be 30 times one's current annual expenditure," according to the HDFC Life Insurance website.
Also read: Retirement planning: 10 simple steps to calculate your ideal retirement corpus
Tips for saving for retirement by 60
Here are a few tips that you can follow when saving for your retirement as per the HDFC Life Insurance website:
- Start early on retirement savings when you have fewer liabilities. The earlier you start, the higher you benefit.
- As your income grows with age, focus on saving a higher percentage of it accordingly. This will help in fighting inflation.
- Get medical insurance at lower premiums when you are young. The coverage will be a great support when you face health issues at an older age.
- Purchase life insurance with a return of premiums option which can provide a life cover on one hand and pay you into a lump sum corpus at maturity, on the other.
- Invest wisely. Focus on growing your returns by investing in sound pension plans while you are young and protect your capital at an older age. A good pension plan calculator can help you evaluate your needs, by factoring in future inflation, and help you choose the right plan for your needs.
- Capital guarantee solutions can be a good choice while investing in the NPS scheme, pension/annuity plans for a regular flow of retirement income are helpful too.
- Try and reduce the debt burden by completing your loan EMI schedules.
To retire comfortably, how much money do I need?
Assess your current expenses to project your retirement savings. Except your daily commute, your daily expenses are likely to remain static upon retirement. It is advisable to strive for 80% of your annual working income as your retirement income. It is important to factor in inflation to maintain your current standard of living.
Retirement experts advise that you save at least ten times your pre-retirement salary and live on 80% of your pre-retirement annual income to ensure a comfortable retirement. This 80% rule is intended to help you cope with inflation by gradually increasing your yearly withdrawals. Therefore, you do not have to limit yourself to withdrawing only 80% of your final salary annually. Instead, you can consider slowly increasing the amount of money you withdraw each year to maintain your purchasing power even as inflation erodes the value of your savings.
Also read: What is the 4% rule for retirement withdrawals?
However, this is a general guideline and may not apply to everyone's individual situation. Certain factors, like lifestyle choices and existing financial obligations, can significantly influence retirement income. Additionally, if you have considerable debts, such as mortgage payments, your expenses may exceed the standard 80%.
It's crucial to note that the 80% rule for retirement savings might not be sufficient if you anticipate new expenses in the future. For example, some people wait until they retire to explore new hobbies or travel destinations, which may require additional financial resources. Therefore, understanding how much money you need to save for retirement will depend on your goals and financial circ*mstances.
FAQs
Retirement experts advise that you save at least ten times your pre-retirement salary and live on 80% of your pre-retirement annual income to ensure a comfortable retirement. This 80% rule is intended to help you cope with inflation by gradually increasing your yearly withdrawals.
How much do I need to save to retire comfortably? ›
Key takeaways. Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement.
What is the 80 percent rule for retirement? ›
The rule of thumb is that to you'll need about 80 percent of your pre-retirement income to maintain your lifestyle in retirement, although that rule requires a pretty flexible thumb.
Do I really need 80% of my income to retire? ›
The typical rule of thumb is retirees should ideally replace 80% of their gross pay, so if you have a $50,000 annual salary, you would ideally want to replace $40,000 of that.
Can you retire $1.5 million comfortably? ›
If you want to retire comfortably, the amount you'll want to aim for is $1.5 million, according to a recent study from insurance company Northwestern Mutual. Given rising inflation in recent years, Americans need to budget much more for retirement than just $1 million (what was seen as the "magic number" back in 2021).
Is $2,000 a month enough to retire on? ›
Retiring on a fixed income can seem daunting, but with some planning and commitment to a frugal lifestyle, it's possible to retire comfortably on $2,000 a month. This takes discipline but ultimately will allow you to have more freedom and happiness in your golden years without money worries.
Is 500k enough to retire at 65? ›
Can I retire on 500k plus Social Security? As we have established, retiring on $500k is entirely feasible. With the addition of Social Security benefits, this becomes even more of a possibility. In retirement, Social Security benefits can provide an additional $1,900 per month, on average.
What is the 80 factor for retirement? ›
Factor 80 Surplus (s.
Member must cease employment on date specified in surplus notice. Age + pension credit = at least 80 on member's last day of employment. The time limit can be from 30 to 60 days, at the employer's option.
What is the 80 20 retirement plan? ›
What is an 80/20 Retirement Plan? An 80/20 retirement plan is a type of retirement plan where you split your retirement savings/ investment in a ratio of 80 to 20 percent, with 80% accounting for low-risk investments and 20% accounting for high-growth stocks.
What is a reasonable budget for retirement? ›
Average Retirement Spending
According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month.
Many retirees fall far short of that amount, but their savings may be supplemented with other forms of income. According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
Can I retire with no money? ›
You can still live a fulfilling life as a retiree with little to no savings. It just may look different than you originally planned. With a little pre-planning, relying on Social Security income and making lifestyle modifications—you may be able to meet your retirement needs.
How much money do most Americans retire with? ›
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000. Taken on their own, those numbers aren't incredibly helpful.
What is the average Social Security check? ›
As of March 2024, the average retirement benefit was $1,864.52 a month, according to the Social Security Administration. The maximum payout for Social Security recipients in 2024 is $4,873 a month, and you can only get that by earning a very high salary over 35 years.
At what age should you have $1 million in retirement? ›
Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you. However, it's important to remember there is no one-size-fits-all amount.
How many people have $1,000,000 in retirement savings? ›
According to the Federal Reserve's latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more.
What is a realistic amount to save for retirement? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
Is $10,000 a month enough to retire? ›
Everyone isn't going to want to spend $10,000 net a month in retirement. For some people, that will be way more than they need each month. For others, it might not be enough. And there might be some people that spending $10,000 net a month in retirement is just right.
What percentage of retirees have $2 million dollars? ›
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
