You’ve heard it your whole life: Start saving for retirement!
Perhaps you have been diligent about saving, driven by the fear of not having enough to live out the rest of your life in peace.
Or you might be living for the now, thinking that you won’t need as much when you are older to be happy.
And that’s the real challenge of planning for retirement now—not knowing exactly how much you’ll need. If you over save, you may be missing out on a fuller life now. If you save too little, you might be full of regret down the road.
So, then, how much should you be saving for retirement and how much retirement money can you spend now?
Becoming a Fortune Teller When It Comes To Retirement
Imagine, you sit across a woman with a crystal ball and are told you can ask anything you want to know about your future. Your first thought might be to ask who you’ll marry or if you’ll ever get that dream job of yours.
Yet, perhaps a better question to ask would be: “How much do I need for retirement?”
That’s because planning for retirement is like trying to predict the future. You can’t know how the market will change, what your finances will be like throughout the years, or even how many years after retirement you’ll have to spend the funds.
Retirement scares many people simply because of its mystery. Its unknown factors keep even the most financially responsible individuals tossing and turning in their sleep.
The Balancing Act
Everyone wants to feel that they have security in their future but what about the now? What if you save to be able to live to be 100 but pass away before that time?
You now have over saved and might be missing out on opportunities now for no reason.
Saving too much for retirement might mean missing out on travel, buying property, or embracing spontaneity. It can also mean missing out on professional opportunities that could make you more prosperous in the future such as starting a new business or switching from a corporate to an at-home job.
But retirement should not be seen as the big bad wolf looming over your life. Retirement is a beautiful step in your life where you get to explore the world, spend time with your loved ones, and rediscover your passions!
Unfortunately, there is no perfect equation for knowing what you can spend to better your life now and how much to save for a better life tomorrow.
There are some sound tips and advice, though, that could help you enjoy both chapters of your life.
The Rules of Retirement
Maybe you were taught the rule of thumb to set a goal of a million dollars for retirement. Or perhaps you’ve always practiced the 4% rule, planning to take only 4% from your retirement fund yearly.
These rules have proven successful for many people. However, everyone requires a different amount of yearly income to maintain a comfortable lifestyle. One person might consider $750,000 retirement fund to be substantial for 22 years of retirement, while another might aim for 1 million dollars for retirement.
Deciding what kind of lifestyle you’d like to have in the future can help you better plan how much to save now.
In addition, you can start practicing these healthy saving habits:
Contribute to an IRA
Many people are already contributing to a 401(k) through their place of employment. However, additionally contributing to an IRA can help you maximize your savings. Also, having your retirement fund split between two hubs will prevent you from overspending as the money isn’t all in one place.
If you make your contributions automatic, you’ll be more consistent with contributing, which can help you feel more comfortable when taking out some of it early for a business opportunity or lifestyle improvement.
Slowly Increase Your Savings Budget
It might be intimidating to start pouring money into savings when you are still transitioning into a career.
Start by setting a reasonable yearly contribution amount and slowly increase that amount over several years until you’ve hit your target. That way, you’ll have the funds you need to get your life to the place it needs to be, without feeling that you are not contributing to your future.
Retirement is a cloudy area in everyone’s life. Knowing how much you’ll need later can impact what you spend now.
Luckily, on our blog, you can find many more tips that can help you balance your spending and saving habits—and take advantage of opportunities for retirement income—so that you can look forward to the joys of retirement instead of fear it!