Planning for retirement must be made well ahead, close to ten years
before retirement, so that we will be having a clear idea on the
retirement benefits.
Early saving is the key to get maximum retirement benefits.
When we save 3000 dollars at 25 years of age and deposit in a bank for a 10 percent interest, we will be getting more return on
saving this, than the amount received, if we start saving 3000 dollars
at the age of 40.
The interest that gets compounded will be more, if we start the
habit of saving at an early age.
We must keep the withdrawal rate to be minimal, up to 4 percent.
In this way, the money present in the bank will be more, even after withdrawal. The remaining amount in bank will continue to grow as the interest is added to it. For example if we have 1 million dollars in the bank, we can withdraw 30 000 dollars each year. We need to plan the living according to the income. We must utilize all the benefits of the tax breaks for the retirement amount, in order to gain more.
The amount of money that needs to be saved for retirement will depend on the following factors –the style of living that we choose for the retirement time and the present income. If the present income is very high, we can save more. If the present income is too low, then we might not be able to save more. As per current strategies, saving ten percent of the income is the best way to save more money for the retirement age. If we wish to have a relaxed as well as a luxurious life after retirement, then we need to save more. If we prefer to set a limitation, lead a simple life after retirement, then our ten percent savings will be enough.
The easiest way to know the amount of money that needs to be saved after retirement is to find the current spending. We need to save the same amount that we spend each month. For instance, if we spend 1000 dollars each month, 1000 dollars must be saved per month. In this way, during retirement, we will have 1000 dollars for each month, though we do not have income. When using the retirement money calculator, deduce the unwanted present expenses and add more for unexpected medical expenses. Inflation rate must also be considered.
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