I always found it discouraging to use on-line calculators to determine how much you should save for retirement. These calculators usually said I needed to have some seemingly huge amount of money for retirement, such as $1.7 million.
Although I do agree that a million dollars is not as much as it used to be, it is still hard to wrap your mind around how you will save that much.
Luckily, I came across an
article ( almost 5 years old) that broke it down in more manageable terms, terms you could put to use.
Here is a chart from the article:
Age---Income---------------------Savings Rate-------------------Deduction per $10,000 Saved
40-----$20,000---------------------10.2 percent-----------------------1.67 percent
40-----$40,000---------------------14.8 percent-------------------------.86 percent
40-----$60,000---------------------17.6 percent-------------------------.57 percent
40-----$80,000---------------------19.8 percent-------------------------.42 percent
40---$100,000----------------------21.4 percent------------------------.35 percent
Read more: http://www.foxnews.com/story/0,2933,290402,00.html#ixzz1ub9zW6wI
This chart is just an example of what a 40 year old would have to work with.
In summary, it basically asks you to identify what income level you are at. Based on that income it specified a particular savings rate you should target. Finally, it adjusts the savings rate by the amount you already have saved.
For example, if you make $40,000 per year, you should save 14.8% per year ($5,920). However, if you have already saved $50,000 toward retirement, you should deduct 4.3% (.86 * 5) from this savings rate target, in this case your new savings target will be 14.5% (14.8 - 4.3).
Anyway, I found this to be a helpful target to help me towards my retirement goals.
You may want to consider adding a percentage or two to this estimate so as to give yourself a cushion from unknown tax or inflationary increases.
Do you have any tips as to how to plan calculate a retirement savings amount? Please share.
