Dear readers, in recent weeks, I have written some articles on savings and I hope you have enjoyed them. As cost of everyday items have generally increased and fixed deposit interest rates have also increased, savings have become of interest to many.
In this post, I am going to share with you my views on how much to save and for how long for your retirement. So, sit back, relax and read the article below.
In a recent post, I shared with readers that to ensure adequate savings for retirement, one should attempt to save up to 25 times of one’s annual expenditure. This is called the 25 x Retirement rule and this rule is premised on a 4% withdrawal rate.
So, is saving 25 times of one’s annual expenditure possible at all before retirement?
Well, this is where I am going to give you the answer right now in this post.
In another past savings post, I have talked about how everyone should save 40% of their annual income and how this seems to be the average savings rate to aim for.
Hence, based on 40% savings, what it means is that one’s annual expenditure is about 0.6 of one’s annual income. Adequate retirement savings of 25 times of one’s annual expenditure will mean saving 15 years of one’s annual income.
With a 40% annual savings rate, saving 15 years of one’s annual income will translate into about 40 years of working (40 x 40%=16) and saving 40% of one’s income diligently.
Hence if an individual starts wok at age 25, and saves 40% of his annual income diligently for another 40 years, he should be able to amass an adequate savings for his retirement.
This is what I called the 40-40 Savings target that an individual should strive for.
Of cos, one’s income may rise or one’s annual expenditure may reduce over years. Or an individual may have other alternate sources of income, hence one may not necessarily wait for 40 years to realize an adequate savings sum.
That’s it for my insights today. I Thank you once again for your support of SG STOCKS INVESTING, your Money and Lifestyle magazine! Connect with me here to follow the daily exciting and useful posts on these two blogs, Thank You for your support!
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