'I'm 49 and earn £125,000 - how can I get half this amount in retirement? Start investing more aggressively earlier in life is the real answer. Much more below. This is the US version, I have no idea what to make of the Brit retirement investment rules! Saving only $2,000 per year/$166.67 per month from age 18 will net you about $1,000,000 if you invested in the broader US stock market through a Total Stock Market fund, or an S&P 500 fund. The total return would be in excess of 7% per year. Assuming a drain of 4% per year on that saved amount, or $40,000, it is clear to net $70,000 or more per year you would need to double up on your investments to an average of about $4,000 per year, or $333.34 per month. This would net $2,000,000 over 50 years, and at 4% drain would result in up to $80,000 of income per year (not adjusted for inflation).
Assuming the assets in the fund grew at more than 4%, and you could adjust your withdrawals down some, this would likely last nigh on forever. Or simply working an additional few years would do the same. Because you are far behind the game, I would suggest setting aside a minimum of 20% of income from today forward. Cut your costs to meet this goal. At $129,000, 20% equals $25,800 per year. You are 49, assuming retirement at age 69, let's be reasonable here you started very late, and a beginning balance of retirement accounts of $185,000 (I am using dollars for my keyboard convince). That give you only 20 years, so you will definitely need to place your retirement investments in an index fund like an S&P 500 or Total StockMarket fund. I assume these will continue to return about 7% per year, mine do better than this on average. Using this calculator http://apps.finra.org/calcs/1/retirement you would likely need to modify your withdrawals, but should be able to make this work, you will need to save much more than you have been saving. You will need to modify your numbers a bit to be more precise, but the example is close enough. Retirement Calculator This calculator can help you estimate how much to save each year to accumulate enough money for your projected retirement. The amount you’ll need to set aside will depend on a number of factors that you can adjust with the calculator, including the type of account you are invested in. Remember that the official retirement age for Social Security purposes is gradually rising for individuals born in 1938 or later. Also keep in mind that tax-advantaged accounts have annual contribution limits. Inputs Go to the calculator to set the various inputs, and obtain personalized results. Results Retirement Analysis Summary You need to save $23,661 in post-tax dollars in your first year of saving and then increase your savings by the inflation rate until you retire in order to meet your retirement income goal. You can see how inflation will change your pattern of contributions over time by looking at the table below. This estimate is based on your Desired After-Tax Retirement Income of $65,000.00 that you entered above. It takes into account your Current Retirement Savings. Your total account value when you reach retirement age will be $1,922,871.60, based on total contributions of $574,893.24 (or $473,214.38 in today’s dollars) and on your Current Retirement Savings. The calculator assumes that contributions and savings grow at the Annual Return you entered. Remember, your annual savings estimate represents the total amount you need to save each year. If you are already saving a certain amount—and if your company is matching some or all of those contributions—you are that much closer to achieving your goal. Uncheck the Adjust Deposits For Inflation box and rerun your calculation to see how much you would need to contribute annually if you wanted to save the same amount each year. Tips to help you achieve your retirement savings goal:
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