According to the National Institute on Retirement Security, nearly half (45 percent) of working-age households don’t have any retirement assets. With less than one year’s worth of their annual salary in retirement savings, nearly two-thirds of those working-age households close to retirement (age 55 and older) are not well prepared.
To retire comfortably, how much do you need to save? You will need to consider retirement age, available pensions, and investment return assumptions when setting your goal. You need enough savings to replace roughly 85 percent of your pre-retirement income according to Fidelity, a mutual fund broker. To reach this goal, many experts estimate you will have to save between 8 and 12 times your pre-retirement annual income.
Determining when you plan to retire will help determine the amount you need to save. A person planning on retiring at age 65 will need to save 12 times their pre-retirement income according to Fidelity estimates. Your savings estimate lowers to 8 times your annual income by delaying retirement just five years, to age 70.
An increasing number of Americans plan on delaying retirement or working during retirement. The majority (51 percent) of workers said they plan on working during retirement in a 2016 survey by the Transamerica Center for Retirement Studies.
There are actions you can take to be in a better position when it comes time to retire. You can be financially prepared for your retirement by considering the following.
- Maximize contributions to your employer provided retirement plan each year. Up to $18,000 can be contributed each year, or $24,000 if you are age 50 or older with a 401(k) pretax retirement plan.
- Each year you can contribute up to the $5,500 maximum, or $6,500 if you are age 50 or older to a Traditional or Roth IRA.
- A health savings account (HSA) can be used to offset medical expenses, up to $3,400 a year, or $4,400 if you are age 55 or older. Contribute as much as possible to an HSA, if you have one available.
Contact our office to review your tax-advantaged retirement strategy.
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