Before you can start saving for retirement, you've got to figure out how much you'll need to save. Finding your "retirement number" can be as simple or as complicated as you want to make it, with the caveat that more complicated plans are likely to produce the most accurate retirement number. However, even a simple "off the rack" plan will get you enough information to build a solid retirement savings strategy. Here are some of the most popular approaches for coming up with your retirement number.

Super simple: Save 15% of your income

If your retirement plan consists of sticking 15% of your income into a retirement savings account and investing the money with an appropriate allocation between stocks and bonds, you are quite likely to end up with plenty of retirement income. The beauty of this plan is that there's no need to do any calculating at all if you have a 401(k) plan; just set your contribution level to 15% and you're done. If you have an IRA you can multiply your paycheck by 0.15 to figure out how much you'll need to contribute for each pay period, then set up the transfer.

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Fairly simple: save $1 million

One million dollars is a nice round number, and even with inflation it should be enough to provide you with a comfortable retirement. There's a bit of calculation involved in figuring out how much you'll need to contribute each month to hit $1 million by your planned retirement date, but luckily, a retirement calculator can do the math for you. When filling in the calculator fields, it's a good idea to keep your expected returns on the low side – no more than 7%. This will cause you to err on the side of saving more instead of less and result in a nice healthy balance even if the market performs poorly overall.

A bit more complex: Aim for 80% of your current income in retirement

Most retirees find that their total expenses decline during retirement (with the notable exception of healthcare expenses), so if you can save enough to generate roughly 80% of your current income every year during retirement, you should be able to get by. However, 80% of current income will only work if you plan a fairly low-key retirement. This figure also assumes that you have little to no debt, including a house that you own and that's completely paid off.

If you want to spend more in retirement or you expect to have substantial debt, increase this number to 90% or even 100%. It's wise to make a list of your planned retirement activities and do at least a rough estimate of your expenses, so that you'll end up with a reasonable number. Whichever percentage you settle on, you can use a retirement calculator to figure out how much to contribute in order to hit your goal.

Most complex: Calculate retirement expenses to determine income requirements

If you want to get a truly accurate picture of how much you'll need to save for retirement, the way to do so is to envision your future self's lifestyle and activities during retirement, add up expenses for everything you'll need for that lifestyle, and use this figure to calculate your minimum income requirement. When calculating expenses, you can start with your current expenses and subtract anything that will no longer be necessary.

For example, if you're sure that your house will be paid off by the time you retire, you can subtract your mortgage payment – but remember, you'll still have to pay property taxes. Once you have a total for your monthly expenses in retirement, multiply that number by 110% to come up with your minimum income requirement. Adding the extra 10% gives you a bit of a cushion in case there are expenses that you forgot or that turn out to be larger than you anticipated. Then take that income number and plug it into the same retirement calculator from the above section.

Which system is right for you?

The best retirement savings plan is the one that you'll actually follow. If you don't have the time or patience to sit down and add up a bunch of expenses, don't even try – just start with one of the simpler plans. The most important part of saving for retirement is getting started early, so anything that makes saving easier will help you enormously in the end. After all, you can always switch to one of the more complex calculation methods later on, when you have a better idea of what you want your retirement to be like.


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