What if your dreams of retirement never become reality?
Many in South Carolina look forward to retiring and soaking up sun rays and lazy days. But, retirement may be impossible if you haven't saved up enough money.
Asking yourself "how much money should I have saved?" Keep reading to learn the answer!
The Raw Amount
We're going to start with a raw amount. However, this raw amount does not fit every person and every retirement strategy, so we will detail other retirement considerations as well as other ways of calculating a more accurate number.
In general, you should have saved about $1,217,500 dollars to retire in South Carolina (according to Yahoo Finance). Depending on various saving factors, this helps you to spend about $49,000 a year and still live comfortably.
Obviously, this number takes South Carolina's particular costs of living into account. So, you may be paying more for utilities in SC than some other places, but your transportation and housing costs should remain relatively low.
The 80% Rule
The exact amount of money given above may not be a "one size fits all" strategy. There is another way that you can calculate an amount that may be more suitable for you and your lifestyle.
You start out by looking at estimated your annual income on the date you are planning to retire. Next, you make sure you have enough money saved to make at least 80% of that previous income amount each year.
Obviously, you won't be able to live the exact same lifestyle that you previously enjoyed. But if you make at least 80% of your previous income, you can live comfortably and not feel as if you had to make too many sacrifices. Keep in mind this rule assumes your home is paid off (more on this later).
Now that you have a couple of potential target numbers in mind, we are going to review some other retirement factors you should be aware of.
How Long Are We Talking?
For most people, "retirement" is a kind of nebulous idea. How long will you be retired? Most of us will say "for the rest of our lives!"
However, retirement savings all comes down to math. And you must have a target number of years in mind to retire comfortably.
The numbers that we mentioned earlier are assuming that you will be retired for 20 years. If you plan to retire for a longer period of time (either due to early retirement or simply living a long, healthy life), you will need to put away that much more money.
The Housing Situation
Here is some good news for some of you. The retirement number that we mentioned earlier is assuming that you are still paying for housing each month in the form of rent or a mortgage.
That will certainly be true of many people, especially if you moved from out of state to SC to come to live by the beach. But if you have a home that is fully paid for, it may significantly reduce your monthly and annual expenses.
Obviously, we still recommend checking with an investment professional to calculate an exact number (more on this later). But the bottom line is that homeowners with a paid-off home may be able to retire comfortably with a lower amount of money saved up.
Pensions: Pay Attention to the Fine Print
So, we have been focusing on saving through traditional means such as a 401(k) from work. However, others may instead be relying on a pension plan.
Pension plans are actually great for retirement purposes because they give you an exact number to work with. You don't always know what the market will be doing in 10 years with your investments, but you will know exactly how much your pension will payout at that time.
Our main pension recommendation is to check the fine print for how much you get depending on when you retire. The pension is designed to pay out a higher percentage of your salary based on long service. This lets you set a target retirement date and know exactly how much your annual salary will be.
Invest; Don't Save
Whether you have a pension or not, we recommend making additional investments on your path to retirement. And that means changing your mentality towards the entire process.
It's easy to think of this as "saving" versus "investing." However, you must think of it as "investing" to truly maximize your retirement.
When you are simply saving money, you may not think it matters where it goes. Any savings account will do...right?
However, the investment mentality focuses on seeing that money grow. Instead of throwing it into a standard savings account, you should put it in something like an IRA or brokerage account.
The better and faster your money grows, the more comfortable your retirement will be.
Investment By Age
We have mostly focused on the amount you'll need to retire at the moment you retire. But do you have set goals before that happens?
For example, a young person might aim to invest at least 50% of their annual salary by the time they are 30. At age 40, it's good to have invested 200% of your annual salary, and 400% by age 50.
By investing more at different ages, you can more easily retire at your target age. This helps to remove the feeling that you must suddenly scramble to save money at the last minute.
Such a professional knows more about the market and market fluctuations which may affect your retirement goals. And they can recommend investment opportunities that are uniquely suited to your life, income, and retirement goals.
With a little prep and professional help now, you can make sure your golden years truly shine.
How Much Money Should I Have Saved? Your Next Moves
Now you have the answer to "how much money should I have saved?" But do you have a beautiful retirement destination in mind?
We help people to find beautiful homes in Myrtle Beach, SC. To find your future dream come, check our real estate listings today!