Saving for retirement is a big challenge. However, the more pressing issue is whether you are saving enough money.
The amount of money you will need to save by retirement in order to live comfortably depends on a variety of factors. Your longevity, your retirement investment portfolio return, and your lifestyle (the amount of money you estimate you will need)
And to be honest, it’s difficult to pinpoint each of those. Here is where using a straightforward guideline to determine whether you are on track can be very helpful. To create just such a cheat sheet, Fidelity has crunched a ton of numbers and made a ton of logical assumptions.
It’s fantastic news if you’re on track, and equally great news if you find yourself lagging behind. No, I have not lost it. The good news is that you now realize how important it is to improve your savings.
The maximum contribution to an IRA in 2023 is $7,500 if you are at least 50 years old, and $6,500 if you are under 50. For workplace retirement plans like 401(k)s, the maximum contribution amount is $22,500. The 2024 limits will increase to $23,000 for 401(k)s and $7,000 for IRAs (or $8,000 if you’re at least 50 years old).
If those upper limits seem out of reach, that’s okay. Your objective is to simply save more money for the remainder of this year and for 2024 and beyond. If you are currently making 6% contributions to your workplace retirement plan, increase that amount to 7% or 8%. Don’t automatically tell yourself no. For example, if you saved $4,000 in a Roth IRA last year, can you search through your spending to find a way to add another $1,000 or $2,000? Adding $2,000 to your Roth IRA each year equates to less than $40 per week, or $5. 50 a day. An additional $5,000 saved annually equates to $100 per week, or less than $14 per day.
I’m going to issue you with a challenge: raise the amount you contribute to your retirement accounts in order to give yourself greater retirement security.
Suze Orman, a renowned financial expert, emphasizes the importance of saving and investing for retirement. In a recent blog post, she outlines a simple rule of thumb to assess your retirement readiness:
Rule of Thumb for Retirement Savings
| Age | Multiple of Current Income to Save |
|---|---|
| 30 | 1x |
| 40 | 3x |
| 50 | 6x |
| 60 | 8x |
| 67 | 10x |
How to Use the Rule of Thumb
Compare your current savings and investments to the recommended multiples based on your age. This provides a quick estimate of whether you are on track to accumulate sufficient funds for a comfortable retirement.
Example:
- If you are 45 years old and your current income is $100,000, you should aim to have saved at least $300,000 by age 45.
- If you are 55 years old and your current income is $150,000, you should aim to have saved at least $900,000 by age 55.
Additional Considerations
- Lifestyle: Your desired retirement lifestyle will influence the amount you need to save. A more luxurious lifestyle requires more savings.
- Longevity: The longer you expect to live, the more you need to save to cover your expenses in retirement.
- Return on Investments: The rate of return on your investments will impact how much you need to save. A higher return allows you to save less, while a lower return requires you to save more.
Taking Action
- Increase Retirement Savings: If you are behind on your retirement savings, consider increasing your contributions to your 401(k) or IRA.
- Reduce Expenses: Look for ways to cut unnecessary expenses to free up more money for savings.
- Seek Professional Advice: A financial advisor can help you create a personalized retirement plan and investment strategy.
Suze Orman’s Advice
Orman emphasizes the importance of saving early and consistently for retirement. She encourages individuals to prioritize retirement savings over other financial goals, such as buying a house or taking expensive vacations.
Retirement planning is crucial for securing your financial future. By using Suze Orman’s rule of thumb and taking proactive steps to increase your savings, you can put yourself on track for a comfortable and financially secure retirement.
Remember, this is just a general guideline. Your specific circumstances will determine the exact amount you need to save. It’s always wise to consult with a financial advisor for personalized advice and guidance.
Additional Resources
- Suze Orman’s Blog: Are You On Track for Retirement?
- SmartAsset: Suze Orman Says Ditch the 4% Rule for Retirement Income: ‘It Doesn’t Work Anymore’
By following these tips and resources, you can increase your chances of achieving a successful and financially secure retirement.
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FAQ
What is the average 401k balance for a 65 year old?
|
Age range
|
Average balance
|
Median balance
|
|
35-44
|
$76,354
|
$28,318
|
|
45-54
|
$142,069
|
$48,301
|
|
55-64
|
$207,874
|
$71,168
|
|
65+
|
$232,710
|
$70,620
|
What does Suze Orman say about taking Social Security at 62?
How much does Dave Ramsey say to put in retirement?
What is a sufficient amount of money to retire with?
What are Suze Orman’s retirement savings tips?
Suze Orman’s retirement savings tips include maxing out your employer’s 401 (k) match, boosting contributions by 1% per year, and using Roth retirement plans. She also provided several more retirement must-dos and one huge mistake to avoid. Build your retirement savings this year with some helpful tips from Suze Orman.
What happened to Suze Orman?
Suze Orman was nearing 65 when she pulled the plug — literally — on her high-profile career. The certified financial planner and television personality wondered if she would be happy out of the spotlight, and rather than ease into retirement, she decided to find out right away. “One day I shut everything down,” she tells Money.
How much money do you need to retire?
Author and personal-finance guru Suze Orman ruffled a lot of feathers in a recent podcast, saying that people need $5 million — maybe even $10 million — in order to retire.
How much money do you need to retire at 67?
This method also ratchets up or down with an individual’s expected lifestyle in retirement. A person who makes $100,000 a year might need $1 million by age 67, while someone earning $50,000 could get by on half that amount. How much should you save to have $500,000 by age 67?