How Much Should I be Investing in Retirement?

investing in retirement

Finances may look different for everyone, but when it comes to investing in retirement, you may begin to ask yourself if there is a correct formula to follow. The financial goal of becoming a millionaire may even sound too good to be true, but having financial freedom is what ultimately motivates people to start investing in their retirement plans. To help stay on track, no matter where you are in life, we are providing a few pointers to help you know an estimate of how much you should invest. 

Desired Annual Retirement (x25 or 4% Rule) 

Everyone’s income is different; therefore, how much you decide to invest depends on how much you want to have at the end of retirement. The formula known as the desired annual retirement, or 4% rule, applies to the annual income you make by either multiplying it by 25 or dividing it by 4 to your retirement income in order to get a realistic number. By using this formula, your answer is better tailored to you and not setting you up for an unrealistic retirement plan. Nonetheless, you should always plan to increase your income as well as your contributions rather it be through a raise or with “side hustles”. 

Age Matters 

While it is technically never too late to save for retirement, age really does matter. Any financial advisor will tell you the earlier you save, the better. Depending on your age, there are various charts made by financial specialists that you can utilize. Essentially, these charts are a recommendation for retirement planning that varies by age and made by assumption only. The percentages given by age will usually consist of how much your return on investment is while keeping inflation in mind. In general, 15% of your pre-tax income is ideal to save for investment. 

Keep a High Savings Rate 

Do not be discouraged by how much you have saved, no matter the age. What counts is keeping your savings rate as high as possible. Even if you have a 401k, Roth or IRA, as long as you keep a savings rate of 50% or higher, you will accomplish a successful retirement plan. By working with a retirement planner, they can better help you watch your spending habits, stay on budget and pay off any debts. An advisor will also be able to break down the calculations to determine your net salary, matching contributions (if any), any investments, as well as your mortgage principal and more. 

Worried you aren’t investing enough towards retirement? Let us connect you with a financial advisor today and get the financial freedom you have always dreamed of having. Care Financial is a privately owned and operated business providing families, individuals and businesses with comprehensive wealth management strategies. Contact us online at or call us at 251-633-7122.