Retirement planning is not always an easy process and ensuring your future financial security may seem complicated due to the calculations involved. However, it need not be so complex, explains retirement expert Robert Berger in an article in U.S. News and World Report. Berger notes there are three basic numbers for determining how much money to put away for your retirement: 25, 15, and your current age.
Why 25? This number comes into the equation when you take those annual expenses you anticipate during retirement, and then subtract your Social Security benefits. Finally, multiply this number by 25. Why this particular figure? The average retiree can withdraw four percent of their savings annually without any substantial risks to their nest egg.
Why 15? The ability to squirrel away 25 times your annual expenses may seem difficult, if not impossible. That’s especially so if you are young and years away from retirement. However, an easy way to encourage the discipline of saving for retirement is to put away 15 percent of your overall income starting while you are still young. If you consistently save 15 percent of your annual income in your younger years, you’ll still meet your goal without putting too much of a dent into your yearly spending.
Why does your age matter? When it comes to investing your money, you still need to have a solid return on your stock-trading endeavors. Berger says achieving an eight-percent return requires the right blend of investments. A mix of income securities and stocks provide an individual investor with the tools he or she needs to provide for a comfortable retirement. Take a look at the assets you want to invest. Then, subtract your age from 100 and set aside that percentage of assets in equities with the rest in bonds. Another strategy is to play your hand in options trading. And that option can be a lot of fun, too.