How Much Do You Need to Save for Retirement?


We would all like to win the lottery and, as a result, supposedly live carefree; for most, if not the vast majority of us, the probability of winning a fortune is small, although a pleasant thought, and represents irresponsible financial planning. That is why we believe that every person should save for retirement, and not only just save, but have a savings strategy so that they can both live well now, retire at a reasonable age, and live well later. Creating a savings plan for retirement and saving itself can feel daunting, but to begin you must ask yourself these questions:

  • When do you want to retire?
  • What kind of lifestyle do you hope to maintain?

When Do You Want to Retire?

First, the age at which you want to retire not only affects how long you have to save money but also the rate at which you need to save. If you wish to retire younger, you may need to up your savings percentage; however, retiring even a couple years later may allow you to save at a lower rate and therefore not only benefit in your current financial state, but also still allow you to progress toward your financial retirement goal.

What Kind of Lifestyle Do You Want?

As you consider your retirement savings, you must also think about what kind of lifestyle you would like to have. Do you want to maintain the lifestyle you have currently? If so, how does this affect your savings strategy? If you want to live more extravagantly in your later years, how does that affect the percentage you’re saving now as well as when you can retire? Dream with realistic goals and ideas in mind. What may seem like a “dream” for your retirement years could be a reality with careful planning and implementation under the guidance of a financial advisor with planning experience.

Unfortunately, there isn’t a “one size fits all” approach to planning for retirement. After initially determining when you want to retire and what retirement looks like for you, the next step is determining your savings percentage.

Your Savings Percentage

Bill Bengen, a popular financial expert, asserts the “4 percent rule,” meaning that you will need to save enough to be able to cover your annual expenses by withdrawing up to 4 percent of your “nest egg.” The theory of this method is that if you maintain a 4% withdrawal rate, you most likely will not run out of money.
The 4 percent rule takes into account some amount of the market’s ups and downs, but if the market takes a major downturn, the 4 percent rule might not stay the rule of thumb. This is one reason why having a financial advisor is important; advisors are individuals who know what you need and have their finger on the pulse of the economy, so you can more confidently adjust your plan to the current reality.

Our Financial Advisors

There are many formulas and calculators for finding the amount you want to save. These are helpful, but ultimately you need a financial advisor who not only can offer professional advice, but who also has years of experience as well as human intuition and informed responses to financial markets. The financial advisors in the Scottsdale and Chicago area offices of Alpha Fiduciary want to help you through this process. We see each client as an individual with their own financial goals. Call us today!


About Alpha Fiduciary

We are driven by a desire to help our clients in as many aspects of their lives as possible, often extending beyond rates of return. Wealth management is more than handling your money. The dynamics of life influence your financial stability and can impact important decisions. We strive to understand the complexities of our clients’ lives so we can develop complete financial solutions that address them adequately. We are an advisory firm that helps you recognize, deal with, and solve life’s challenges through Total Wealth Management.