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More than half (56%) of US adults do not know how much money they will need to retire, according to data from Northwestern Mutual's 2019 Planning & Progress Study.
This is alarming. Emily Holbrook, Senior Director of Planning at Northwestern Mutual, told CNBC Make It that without understanding how much money they will actually need, many people fail to save effectively for their retirement.
While there are general guidelines that specify how much you should aim to save, "this really comes down to a lot of specifics for each person individually," Holbrook said.
The retirement does not look the same for everyone and what works for your friend or neighbor may not be enough. "You have to understand, how do you plan to live your retirement, will you have expenses that will increase if you want to travel a lot, for example?" Holbrook asks. "What travel do you want to do, how does it align with what your spouse thinks of retirement plans?" Not only must you have a basic rule, but you also need to think about what retirement is like. looks like."
You must not only have a basic rule, but also think about what retirement looks like.
Emily Holbrook
Senior Director of Planning at Northwestern Mutual
Many Americans do not take these steps to plan, and it shows in their bank accounts. A worrying savings of 22% has less than $ 5,000 in savings reserved for retirement, noted Northwestern Mutual. 5% have between $ 5,000 and $ 24,999 set aside and only 16% have saved $ 200,000 or more.
Respondents to the survey say on average that their chances of surviving their savings are 45%. Despite this, 41% did nothing to improve their situation.
If you do not know how much you should put aside for the future, Holbrook recommends sitting with a trusted finance professional who can help you create a personalized plan. "People should absolutely take action," she says. "They have to meet a financial advisor and discuss their options."
To get a rough idea of what you should be aiming to save, Nick Holeman, Certified Financial Planner and Senior Financial Planner at Betterment, recommends starting with two simple questions:
- How old are you to retire?
- How much do you want to spend per year on retirement?
From there, you can start calculating how much you might need. It is also important to take into account factors such as life expectancy, taxes, social security and the amount of your debts, he says.
Fidelity Financial Services also provides guidance on how much you need to save in different stages if you want to retire at age 67.
- By 30: have the equivalent of your salary checked in
- By 40: have three times your salary checked in
- By 50: have six times your salary checked in
- By 60: have eight times your salary checked in
- By 67: having 10 times your salary checked in
For more information on how to know if you are about to save enough in retirement, check out the following resources.
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