Even if you have substantial savings, and a retirement plan, you might still doubt whether you are saving enough for retirement. Retirement savings is dependent on the time you have left before you retire.
If you’re in your 20s, you might not even be thinking of any savings for your retirement because you have other concerns. You might still be paying off student loans, housing loans, credit card debts, and other expenses.
It is usually when you have established some stability, and responsibility that you start thinking about retirement. When you’re in your 30s, you can put more into your retirement plan. Besides the 401K, you can also put in a larger amount towards long-term investments.
As you grow older, your retirement fund should also be larger. Some experts have the following estimates to what is a good growth rate for your retirement plan:
- By your 30s: Savings equivalent to your salary.
- By the 40s: three times your salary
- 50s: six times your salary
- 60s: eight times your salary.
Although you already have a 401K, you can also have the above financial plan as a backup or as a supplement to your retirement plan.
Outside of 401K
The advantage of a 401K is that it is minimally taxed. It is a savings plan for when you retire, and have no more regular job. When you cash in your 401K, and use it for your retirement expenses, you are taxed less for the funds because these are not short term investments to be used for a business. In effect, you are banking on yourself, for your personal expenses later in life.
It may be difficult to save, especially with trying times and an unpredictable financial environment, but that’s the only way to put away something for the future. Experts advise that younger people should save up to 10% of their income. As you grow older, and more financially secure, you should increase this to 20% or more. If you want to retire comfortably, you should consider ways to become wealthier, by saving up to 75% of your income. There is a threshold of wealth, where the disposable income becomes larger than the cost of living, and this is the key to being independently wealthy for retirement.
Life is a series of events, each with its own set of opportunities and challenges. From the joy of tying the knot to the complexity
What is life insurance, and why is it important? Life insurance is a financial contract between an individual and an insurance company. In exchange for