1 week Ago By SmartAsset
SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. Retirement saving is a long-term plan to set aside and invest money to provide income after you stop working. It often involves contributing to accounts like 401(k)s or IRAs.
Starting early helps savings grow through compound interest. Understanding these five basics could help you make decisions to support your financial goals. A financial advisor can also work with you to create a retirement plan.
1. Discover How Much to Save Determining how much to save for retirement is where planning for your financial future begins. The amount you need to save depends on several factors, including your desired lifestyle, expected retirement age and life expectancy.
Many financial experts recommend setting a goal to replace about 70% to 80% of the income you earn just before you retire to maintain your accustomed standard of living. This percentage can vary based on personal circumstances, such as healthcare needs and travel plans, so savings goals are tailored to individual situations. A good place to start is by estimating annual expenses in retirement.
Consider costs such as housing, healthcare, food and leisure activities. Once you have a rough estimate, multiply this figure by the number of years you expect to be retired. This will give you a ballpark figure for your total retirement savings goal.
Don’t forget to account for inflation , which erodes purchasing power over time. Using a retirement calculator can help you adjust for these variables and provide a more accurate savings target. 2.
There Are Different Types of Retirement Accounts Each type of retirement account offers specific benefits and potential drawbacks. Choosing the right one depends on your financial goals and circumstances. Here are four common types and their key characteristics:.
