Investing for your retirement is one of the most important financial decisions that you can make. It is important to talk to a financial advisor early in your life in order to make sure that you are making the right investments to be able to retire when you would like to.

Unfortunately, many people do not plan for their retirement in advance and end up with a retirement account that is well short of the amount of money that they need in order to live comfortably during retirement.

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There are many tools available online that can help you get started with your retirement planning, no matter what your current age may be. These tools can help you begin setting some goals so that you will be able to retire with an amount of money that allows you to live comfortably.

While these tools can help you plan, it is important to note that there is no hard and fast rules for a percentage of their income that should be invested for retirement. Every person and couple are different, which means there are different requirements and needs for everyone.

Setting Goals
The first step in determining what percentage of your income you should be setting aside for your retirement is to establish objectives. There are several questions to consider when planning for retirement.
What age do you want to retire at?

  • How much income will you need to live comfortably when you retire?
  • What will your bills look like at the time of retirement? For example, will your home be paid off?
  • Do you wish to maintain your current working standard of living or are you willing to downsize?

Typically, it is a good rule of thumb to plan on having an income that is at least 70 percent of what your current gross income is. Typically, people in retirement need less money to live on during their retirement years than they do during their working years because the majority of their bills are already paid off.

Savings Guidelines
There is not a predetermined amount of your income that you have to save for your retirement. The percentage that you need to save depends on your current age, the age you plan on retiring, and the rate of return that you expect to make for your investments.

For example, a person who is currently 25 and wants to retire when they reach the age of 65 with a savings of $500,000 will not need to save as much as a 35-year old who wants to retire at 65 with $500,000.

Calculated Example
In order to get an idea of the percentage of income that you need to invest for retirement, let’s look at an example. Let’s say that you are 35 years old and want to retire when you are 65 years old. Your current income is $50,000 and you want to retire with $35,000 to live on each year. If you can assume that you will earn 5 percent on your investments you would need to have $700,000 to retire on when you reach age 65. In order to achieve this goal, you will need to save a little more than $10,500 per year. This is around 21 percent of your current income in order to achieve this goal.

Variables
There are many different factors that can change the percentage that you need to save. If you begin saving at an earlier age or if you can earn a higher rate of return on your investments, the amount that you will need to save will go down. However, if you are starting later or if you are going to earn less interest, you will need to save a higher amount.

In the above example if you were 30 and could earn 6 percent you would need to have $583,333 when you turn 65, which means that you would only need to invest about 10 percent of your income, which is a dramatic decrease from the 21 percent.

Conclusion
When it comes to the percentage of your income that you should be investing for your retirement the key is to begin saving as soon as you can and be extremely disciplined about it. The earlier that you start saving for retirement, the lower the percentage of your income you will need to invest.

Even if you are starting out late, try to invest a minimum of 10 percent of your current gross income. You should then increase this amount as necessary in order to make sure that you meet your retirement goals.