Whether it’s 30 years away or 5 years away, retirement is imminent for almost all of us. But how much do you need to save to live comfortably in your glory years?
It’s a simple enough question. But the answer is complicated because there are so many variables—some known, others impossible to pin down—that can shape the answer, sometimes dramatically.
A popular rule of thumb says that you should withdraw three percent to five percent of your savings in your first year of retirement and that you should increase your withdrawals over time to account for inflation.
But is that a realistic rule to follow? Let's say you have $500,000 saved for retirement. Using 5% as the rule, this would provide you with $25,000 in your first year of retirement. Coupled with social security and your other income would this be enough for you? Be honest with yourself about expenses, both fixed and variable. $25,000 probably isn’t enough if you’re still paying off your mortgage or you plan on traveling during retirement. To get the real dollar amount you need to save, you’ll need to do some serious number crunching, starting with an estimate of your expenses in retirement.
If you feel lost, you’re not alone! Ask for help from a professional to get you on the right track toward retirement. Just don't stop saving.
For more information on this and other financial questions, visit BECU’s collection of resources.