You can save for retirement in many ways. However, it is important to know just how much is needed.
What are your lifestyle plans for retirement? How do you replace your salary? What about healthcare? Transportation? Everyday expenses? These are all good questions, according to US News & World Report in “Are Your Retirement Savings Ahead of the Curve?”
Here are some important points to help you as you plan for retirement income:
Make the most of your 401(k). The top contribution limit to a 401(k) for 2018 is $18,600. Workers over 50 and up can add catch-up contributions of an additional $6,000. That means if you can swing it, you can contribute $24,500 in 2018. Fully funding this account also gets you the best possible tax deductions. Few people did this in 2017, according to a Vanguard analysis. Of those who do, most of them earn more than $100,000 annually and are closer to retirement age.
Can you get to $1 million in your 401(k)? People who start early and save consistently over time can accumulate big bucks in their retirement accounts. People with 10 or more years on the job, have an average balance of $210,000, nearly four times as much as the average of $53,000 for those with four to six years at a company, says the Vanguard data. A report from Fidelity echoes those numbers, with employees who work for a longer time period, saving an average of $290,000 and after 15 years, an average of $379,000.
Take advantage of catch-up contributions. Research from T. Rowe Price Retirement Plan Services says that only 12% of eligible 401(k) plan participants made catch-up contributions in 2017. It’s not that easy to do but well worth it for your retirement success. One strategy? When you get a raise or a bonus, put that money into your 401(k) plan.
Do better than your peers in savings. The amount that people can save increases as they age. However, if you want to be ahead of the curve, use 10% of your income as a target rate, if you aren’t sure how much you want to put away for your golden years. Vanguard analyzed ages and account balances and found that people saved more in their 401(k)s, as retirement got closer. People in the 35-44 age bracket saved 5.4%, those in 45-54 age bracket saved 7%, people in the 55–64 age bracket saved 8.3% and those age 65 and over saved 9%.
If you shoot for 10% of your income, you’ll be way ahead of the retirement savings curve.
Any of our estate planning attorneys can advise you in updating or creating an estate plan that fits your unique circumstances which may include retirement plans.