Many of us tend to delay planning for our retirement, even though we know that we won't have a steady income once we retire. However, experts warn that delaying our retirement savings and prioritizing pleasure and comfort in our younger days can result in a financial crisis in our retirement years. To avoid such a scenario, it's crucial to start planning early for our retirement and begin saving as soon as possible.
Retiring at 60? How much to save
Determining the amount required for a comfortable and happy retired life is subjective and depends on individual perceptions, expectations, expected income, estimated inflation, expenses and debts, and the expected lifespan. However, financial advisors propose certain general guidelines to establish a benchmark target to help individuals achieve a comfortable and relaxed lifestyle during retirement.
Also read: How to save for your retirement
"One theory suggests that saving 15% of one's annual income every year (including employer's contribution) can be appropriate for many. Another popular theory says the ideal corpus for retirement should be 7-8 times one's salary by the start of one's 60s. According to the 30X rule of retirement, for a comfortable retirement, the total savings should be 30 times one's current annual expenditure," according to the HDFC Life Insurance website.
Also read: Retirement planning: 10 simple steps to calculate your ideal retirement corpus
Tips for saving for retirement by 60
Here are a few tips that you can follow when saving for your retirement as per the HDFC Life Insurance website:
- Start early on retirement savings when you have fewer liabilities. The earlier you start, the higher you benefit.
- As your income grows with age, focus on saving a higher percentage of it accordingly. This will help in fighting inflation.
- Get medical insurance at lower premiums when you are young. The coverage will be a great support when you face health issues at an older age.
- Purchase life insurance with a return of premiums option which can provide a life cover on one hand and pay you into a lump sum corpus at maturity, on the other.
- Invest wisely. Focus on growing your returns by investing in sound pension plans while you are young and protect your capital at an older age. A good pension plan calculator can help you evaluate your needs, by factoring in future inflation, and help you choose the right plan for your needs.
- Capital guarantee solutions can be a good choice while investing in the NPS scheme, pension/annuity plans for a regular flow of retirement income are helpful too.
- Try and reduce the debt burden by completing your loan EMI schedules.
To retire comfortably, how much money do I need?
Assess your current expenses to project your retirement savings. Except your daily commute, your daily expenses are likely to remain static upon retirement. It is advisable to strive for 80% of your annual working income as your retirement income. It is important to factor in inflation to maintain your current standard of living.
Retirement experts advise that you save at least ten times your pre-retirement salary and live on 80% of your pre-retirement annual income to ensure a comfortable retirement. This 80% rule is intended to help you cope with inflation by gradually increasing your yearly withdrawals. Therefore, you do not have to limit yourself to withdrawing only 80% of your final salary annually. Instead, you can consider slowly increasing the amount of money you withdraw each year to maintain your purchasing power even as inflation erodes the value of your savings.
Also read: What is the 4% rule for retirement withdrawals?
However, this is a general guideline and may not apply to everyone's individual situation. Certain factors, like lifestyle choices and existing financial obligations, can significantly influence retirement income. Additionally, if you have considerable debts, such as mortgage payments, your expenses may exceed the standard 80%.
It's crucial to note that the 80% rule for retirement savings might not be sufficient if you anticipate new expenses in the future. For example, some people wait until they retire to explore new hobbies or travel destinations, which may require additional financial resources. Therefore, understanding how much money you need to save for retirement will depend on your goals and financial circ*mstances.
FAQs
Retirement experts advise that you save at least ten times your pre-retirement salary and live on 80% of your pre-retirement annual income to ensure a comfortable retirement. This 80% rule is intended to help you cope with inflation by gradually increasing your yearly withdrawals.
How much should you save for retirement to live comfortably? ›
Consider common rules of thumb
The rule used most often is the 80% rule, which says you should aim to replace 80% of your preretirement income. This is a loose rule: Some people suggest skewing toward 70%; some think it's better to aim for a more conservative 90%.
Can you retire $1.5 million comfortably? ›
If that budget looks comfortable, it's a good sign that you can reasonably expect $1.5 million will cover it if you retire at 45. A financial advisor can help you project expenses, inflation, portfolio growth and more in a comprehensive financial plan. Get matched with a financial advisor.
How many people have $1,000,000 in retirement savings? ›
According to the Federal Reserve's latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more.
Do I really need 80% of my income to retire? ›
The typical rule of thumb is retirees should ideally replace 80% of their gross pay, so if you have a $50,000 annual salary, you would ideally want to replace $40,000 of that.
What percentage of retirees have $2 million dollars? ›
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
Can you retire at 60 with 500k? ›
The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.
How much money do most Americans retire with? ›
The answer depends almost entirely on you, your habits now and your plans for later,” the financial services firm noted on its website. Data from the Federal Reserve's most recent Survey of Consumer Finances (2022) indicates the median retirement savings account balance for all U.S. families stands at $87,000.
What is the average 401k balance for a 65 year old? ›
Average and median 401(k) balances by age
| Age range | Average balance | Median balance |
|---|
| 35-44 | $76,354 | $28,318 |
| 45-54 | $142,069 | $48,301 |
| 55-64 | $207,874 | $71,168 |
| 65+ | $232,710 | $70,620 |
2 more rowsMar 13, 2024
Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you. However, it's important to remember there is no one-size-fits-all amount.
By contrast, about 4% have between $500,000 and $999,999. There are also those who have several million dollars in savings for their senior years -- but it's a really small percentage. In fact, only 0.1% of U.S. savers have a nest egg worth $5 million or more.
What percentage of retirees have $4 million dollars? ›
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees—which a retiree with $4 million in assets would fall into—can expect to pay about 22.7% in state and federal taxes.
What percentage of retirees have $3 million dollars? ›
Specifically, those with over $1 million in retirement accounts are in the top 3% of retirees. The Employee Benefit Research Institute (EBRI) estimates that 3.2% of retirees have over $1 million, and a mere 0.1% have $5 million or more, based on data from the Federal Reserve Survey of Consumer Finances.
What's a good monthly retirement income? ›
Many retirees fall far short of that amount, but their savings may be supplemented with other forms of income. According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
How much do I need in retirement if my house is paid off? ›
One rule of thumb is that you'll need 70% of your annual pre-retirement income to live comfortably. That might be enough if you've paid off your mortgage and you're in excellent health when you retire. But if you plan to build your dream house, travel or get that Ph.
Can I retire at 60 with 300k? ›
£300k in a pension isn't a huge amount to retire on at the fairly young age of 60, but it's possible for certain lifestyles depending on how your pension fund performs while you're retired and how much you need to live on.
How much money do you need to save to live comfortably? ›
The 50/30/20 budget recommends that for sustainable comfort, 50% of your salary should be allocated to your needs, such as housing, groceries and transportation; 30% toward wants like entertainment and hobbies; and 20% toward paying off debt, saving or investing.
Can you live comfortably on 100k a year in retirement? ›
“With a nest egg of $100,000, that would only cover two years of expenses without considering any additional income sources like Social Security,” Ross explained. “So, while it's not impossible, it would likely require a very frugal lifestyle and additional income streams to be comfortable.”
