Take 2 Minutes to See if You’re on Track to Retire (Future You Thanks You)

Senior woman on beach
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Are you confident you’re saving enough for retirement?


I made a funny joke there, right?

It’s common knowledge that most people aren’t giddy about their retirement savings.

According to Northwestern Mutual’s 2018 Planning and Progress Study, 1 in 5 Americans have no retirement savings at all!

Of the 2,003 adults surveyed, more than half said they expect to work past age 65. And 73% of those people said they will continue to work because they won’t have enough to live on otherwise.

Bummer, right?

But there’s no reason you need to become another statistic.

Today Is the Day to Start Investing for the Rest of Your Life

Listen, I know you have a lot of great excuses for why you’re not saving. And it’s scary, because charts like this one say you have to have your entire salary saved at 30. Meanwhile, you’re just trying to make your student loan payments.

But you have to save for retirement, because Plan B is working until you die. And you don’t need that kind of negativity in your life.

Talk to human resources and make sure you’re getting your 401(k) match at work. If you’ve done that, head online to an investment company like Vanguard, Schwab or Fidelity and open a Roth IRA.

Once you get your accounts set up, it’s much easier to figure out what you actually need to save.

How to Calculate What You Need in Retirement Savings

Basically, you need to make a budget for your future. Figure out what you want to spend annually in retirement. My goal is currently $40,000 per year for my husband and me. Consider that when you retire, you should have all the “stuff” you’ll ever need so you can live more frugally.

The key to saving the right amount for retirement is the Multiply by 25 rule.

You multiply your desired annual income by 25, and that’s how much you’ll need to retire. Why 25? It produces the number you need to generate a 4% return accounting for inflation.

You can safely withdraw 4% from your retirement savings if you want it to last well beyond 30 years.

If we want pull out $40,000 our first year of retirement, we’ll need to have $40,000 x 25, which is $1 million. This will allow us to withdraw 2% more every year to keep up with inflation.

That doesn’t mean we’re putting $1 million of our own dollars into retirement. This includes all the compound interest that will build over time.

That means the earlier you start saving for retirement, the less money you’ll have to put in, and the less work you’ll be doing in your golden years.

Jen Smith is a junior writer at The Penny Hoarder who gives tips for saving money and paying off debt on Instagram at @savingwithspunk.