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Will you be Ready for Retirement (infographic)

Being ready for retirement means staying on track with your savings

I love the Ready for Retirement infographic below from Money Crashers. The graphic shows how much you should have in your retirement accounts at certain ages to be on track for $800,000 in savings when you reach 65, assuming an 8% annual return.

The graphic also offers quick advice on the best investments for your 401k and Roth IRA as well as retirement plan withdrawal options without paying a penalty.

39% of households say they don’t have a formal retirement plan, which means they don’t really know what it will take and how much it will cost in retirement. Planning for retirement can seem like an impossible task, especially for younger people but it doesn’t have to be difficult. The younger you are, the less detailed your plan really needs to be but it is important to have a plan.

While I really like the advice in the infographic, the ending balance of just over $800,000 may not be enough for many people to retire. You will need to map out your own expenses in retirement and how to get there to cover your own circumstances. Week three of our Five-week personal finance fix focused on realistic retirement planning at different ages, check it out.

“How Much to Save for Retirement – Are You Ready?” – An infographic by Money Crashers Personal Finance

The graphic assumes you save 6.9% of your income annually to be ready for retirement. That’s not too difficult but the 8% annual return is probably unrealistic. The stock market has returned around that much annually over the long-run but you can’t sink all of your retirement savings in stocks.

Diversifying your retirement savings so you don’t freak out the next time stocks take a dive means investing in other assets like bonds and real estate. Click through to my investing blog, My Stock Market Basics, to learn more about diversification and see why I don’t worry about a stock market crash.

A more realistic return on a diversified investing portfolio would be closer to 6% for younger investors and 4.5% for older investors approaching retirement. Changing the return assumption on the graphic will change the amount you have left but you should still be ready for retirement.

If you’re not sure how much income your nest egg will provide, I’ve developed this easy retirement income calculator to help estimate income and how much you need to get there.

Personal Capital offers an excellent retirement calculator to check out your progress and make sure you’re ready for retirement. The site is a wealth management tool, allowing you to link all your accounts from banking to credit cards and investing. Not only does it make it easier to have everything in one place but the tools help you calculate everything from your net worth to fees you’re paying and see where you are in the road to retirement.

Retirement Planner – A Retirement Calculator Like No Other

Some of my favorite points from the “Ready for Retirement” infographic,

  • Max out your contributions to a 401K, especially if your employer is matching. It’s Free Money!
  • You can make extra contributions if you’re over 50 years old
  • Understand the tax differences between a Roth IRA and a traditional IRA. Roth contributions won’t save you on taxes now but are tax-free when you withdraw.

Making sure you’re investing enough and that you’ll be ready for retirement doesn’t have to be a stressful process. Check out these crazy retirement myths to avoid the conventional ‘wisdom’ and get ready to ENJOY your retirement.

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Comments

  1. I thought the limit for a 401k contribution was $18,000 for 2016? Is that correct, or do I have it wrong?

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