Have you ever wondered how much you need to save for your retirement? Well, you’re not alone. Many people struggle with knowing how much is enough and the answer isn’t a cut and dry one. There are many different factors that take place including when you want to retire, current age, current savings, amount needed in retirement each year, risk tolerance, current income, and future income such as social security and pensions.

For example, a person who makes $200,000 a year but only needs $40,000 a year in retirement and has been saving for a while, may not necessarily need to save the same percentage of income as someone who makes $50,000 a year and needs $50,000 a year in retirement.

In financial planning, the general guideline is to save 10-15% of your income each year starting in your 20’s. But, if you start in your 30’s or 40’s, this percentage may not apply to you and it may have to be increased.

A good exercise to figure out how much you need to save is to get out your calculator and plug in some assumptions. Include what you’re currently saving and what that amount may be at your retirement age given a pessimistic rate of return and remember to subtract for inflation of approximately 3%. Take that final number and multiply it by 4%. This will give you a very rough estimate of what you can withdraw from your retirement savings per year. 4% is the general financial planning principal that says you can withdraw 4% per year in retirement given a moderate risk portfolio and “never” run out of money. Never is in parentheses as nothing is guaranteed, but it gives us a good idea of what to expect.

Please note that the above information is not a recommendation. If you have specific personal questions or need help in creating a financial plan, our fiduciary financial advisors in Grand Rapids, Michigan would be happy to help. Give us a call at (616) 285-7818 or email us at team@synergywm.com.