Retirement planning is a crucial aspect of financial planning that involves setting aside funds to ensure a comfortable and secure retirement. The 90000/12 rule is a widely used guideline for determining how much you should save for retirement.
The 90000/12 rule suggests that you should have $90,000 saved for retirement by the time you reach age 65. This amount is based on the assumption that you have a retirement income goal of 12 times your expected annual retirement expenses.
Formula:
Retirement Goal = 12 x Annual Retirement Expenses
For example, if you expect to spend $6,000 per year in retirement, you would need to save $72,000 by age 65.
The 90000/12 rule has been widely accepted since it was proposed by financial advisor Harold Evensky in the 1990s. Evensky based his rule on historical data that showed a strong correlation between pre-retirement savings and post-retirement income.
Transition to Key Figures
According to the Center for Retirement Research at Boston College, the median retirement savings balance for households headed by someone age 65 is $211,700. This suggests that many Americans are not on track to achieve the 90000/12 rule.
Transition to Table 1: Retirement Savings by Age Group
Age Group | Median Savings |
---|---|
25-34 | $17,000 |
35-44 | $45,000 |
45-54 | $85,000 |
55-64 | $153,000 |
65+ | $211,700 |
Meeting the 90000/12 rule can significantly increase your chances of a comfortable and secure retirement. Here are some key benefits:
Achieving the 90000/12 rule requires careful planning and consistent savings. Here are some tips and tricks:
Avoid the following mistakes that can derail your retirement savings efforts:
Lessons Learned:
The 90000/12 rule is a valuable guideline for retirement planning that can help you achieve financial security and peace of mind. By following the tips and tricks outlined in this article, you can increase your chances of a comfortable and fulfilling retirement.
Expense Category | Annual Cost |
---|---|
Housing | $40,000 |
Healthcare | $15,000 |
Transportation | $6,000 |
Food | $5,000 |
Entertainment | $4,000 |
Other expenses | $10,000 |
Total Expenses | $80,000 |
Estimated Retirement Income:
Retirement Funding Gap: $30,000
Savings Option | Benefits | Drawbacks |
---|---|---|
401(k) | Tax-deferred growth, employer matching | Contribution limits, penalties for early withdrawal |
IRA | Tax-free or tax-deferred growth | Lower contribution limits, income restrictions |
Roth IRA | Tax-free withdrawals | Income restrictions, no catch-up contributions |
Annuities | Guaranteed lifetime income | High fees, surrender charges |
Real estate | Potential for appreciation and rental income | High transaction costs, maintenance expenses |
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