Dear readers, against the high cost of living these days, savings is now in the spotlight once again. The high fixed deposits interest rates have also encouraged more to save and to save more. Amidst all the savings that is taking place, I find that the overall narrative for savings should still be how much one should save for one’s retirement.
In a recent post, I shared with readers that in general, one should save about 40% of our income. But that alone gives just the saving rate that one should target at, rather than the actual amounts one should save up for retirement.
For a retirement amount to save up to, one can search online easily and discover that there is one simple rule: that is the 25x Retirement rule. Simply, put in order to stick with the 4% withdrawal rate, most people would need to have 25 times of their annual expenses in their portfolio.
So if you are spending $50,000 a year, you will need $1.25m savings for your retirement.
I have a personal take on the 25 times retirement savings rule as versus the 4% annual withdrawal rate. If an individual were to retire earlier say at age 55 and lives till an average lifespan of 80 years ago, that will mean the individual should need savings to cover the 25 years in retirement without an income. But in reality, the amounts needed may be more to cover the higher medical needs in old age.
How much of your annual spendings have you saved?