BOSTON (CBS) – Can you live on a $30,000 income in retirement? That’s the average Social Security retirement benefit for two people. If the answer is no, listen up.
We have been discussing the Fidelity savings plan to replace 85% of your income in retirement and becoming half a millionaire. To be on schedule at age 45 you should have 3 times your salary saved. So with an end salary of $60,000 then you would need $180,000 in your 401(k). Not many people do!
At 40 there is still time to save for retirement. If you are already in a retirement plan at work be sure you are contributing as much as you can to the plan. Saving for your retirement will need to become a priority.
If you want to have a nest egg of $1 million and you have not started you will need to be aggressive. Assuming you are 40 years old and want to retire at 67 and we assume an 8% average return over those years you will need to save $11,000 a year to reach this goal. That’s $297,000 over the next 27 years.
Most people don’t have an extra $11,000 a year in their budget they can earmark for retirement savings, but at 40 you do need to do some serious planning if you want a comfortable retirement.
To reach the goal of having a half million you will need to save $6,000 a year until age 67.
Most 40-year-olds are in the prime of their careers and at peak earning capacity. Bite the bullet and figure out a way to be saving more for retirement.
Increase your retirement plan contributions every six months by one or two percent. You won’t miss the money if you do it gradually. And everyone in the family may have to give up those Saturday afternoons at the mall.
Most 40-year-olds are saving for college as well as retirement, just a word of advice here, there are no scholarships out there for retirement.