You know that saving for retirement is important, but you may be wondering exactly how much you need. Without this information, you may not save enough for retirement and could become blindsided by how much you really need to obtain financial freedom when you leave the workforce.
According to Forbes, every year, you will need roughly 70 to 90 percent of your current annual income to enjoy financial stability throughout retirement. AARP and the Retirement Living Information Center also recommend 1 million to 1.5 million as a more specific retirement savings goal.
However, for many Americans, becoming a millionaire by retirement age would require you to increase your cash flow several times over. This is because the usual sources of retirement income, such as pension, social security and savings are unlikely to add up to a 7-figure amount. Luckily, there are ways to invest and increase your savings before retirement.
1. Save Your Tax Refund Money
Many Americans look forward to getting their tax return money, so they can purchase a car, make a down payment on a house or book a trip. However, Forbes recommends that you save your tax return money and set it aside for retirement.
2. Set Up a Savings Plan
While tax returns will add a good chunk of change to your retirement plan over time, unless you are married with dependents and paying a mortgage, you’re unlikely to get money back every year. Because of this, a more standard savings plan helps to ensure you file money away on a regular basis for retirement. Good options include an Individual Retirement Account (IRA) or employer-sponsored retirement plans.
3. Hire a Wealth Manager Strategist
Investing is a great way to increase your savings amount, while also fighting the effects of inflation. However, navigating financial investments comes at a high risk and should involve the expertise of a professional to guide you. Wealth strategists, also known as fiduciary investment advisers or financial planners, help to point you in the right direction. Forbes estimates that this can add an extra 4 to 6 percent in returns on investment to your financial portfolio, each year.
Saving for retirement is a big responsibility, but the sooner you take it on the less of a burden it is. This helps to ensure your financial freedom when you are no longer gainfully employed. For more information about how our wealth strategists at Up Planning Edge can assist you with your retirement plans, contact us today.