The question of how much to save for retirement is usually answered with: it depends on your lifestyle or, as much as you can. However, this statement is rather vague. The following suggestions should be considered.
Take Inflation into Account
The way the economy works, your money today will be worth less in the future. As you start saving, keep this in mind. When calculating your savings, always think about this. When you save money, it’s essential that you put them in an institution that generates interest. This should help you deal with increasing prices.
The inflation factor can be hard to figure, but a financial calculator should give you a good prognosis in terms of analyzing the rate.
Your health status plays a crucial part when figuring out how much to save for retirement. If you have any kind of ailment or predisposed to it, saving as much as possible is necessary. Health insurance is essential. It may be costing you now but if something happens in the future, you’ll be glad you took it.
Even if you are healthy, medical expenses should always be accounted for. Maintaining a healthy lifestyle is actually one of the best ways to save money. By eating and living right, you won’t have to worry about spending your funds on medication.
401k and Others
You should take advantage of 401k. The earnings here may vary, but it can be quite substantial if you contribute consistently. Add in Social Security and whatever savings you make, and it will go a long way. As you calculate how much to save for retirement, don’t forget these options.
You can also put your money in banks. Savings accounts and time deposits have low interest rates, but over time it will accumulate. The point here is that you should set aside some money and put them in some sort of savings account. You can just place all your savings in 401k or in the bank, it’s up to you. But just start saving.
Making Wise Investments
Because bank rates are low, some decide to invest their money elsewhere. There are mutual funds, the stock market and the forex. The rate of return here is larger. Some people have made a fortune buying and selling shares.
But there are a lot of risks here. If you are going to put your funds in a money making scheme, make sure you understand what it’s about.
It’s not enough to know how much to save for retirement. You must know where you are putting it. Don’t put your money there if you don’t understand the mechanics.
Pyramiding and Ponzi schemes work by offering high rates and confusing rules. Don’t be blinded by the high returns; when it falls, it could be disastrous.
Of course, no amount of planning will do if you spend money like it is going out of style. Having a large salary makes splurging very tempting. The world around you is filled with gadgets and things begging to be bought.
Just think in the long term. All of this extraneous stuff are fads, and will pass. By knowing how much to save for retirement, you’ll be able to live more comfortably in your later years.