Retirement should be a time to relax and enjoy the life you’ve worked hard to build. But when it comes to figuring out retirement, it’s not always straightforward. One of the first questions to ask yourself is: how much should you save for retirement? Guidelines like the 80% rule can be a helpful starting point, but today’s retirement planning requires a broader approach, accounting for factors like rising healthcare costs, inflation, and your personal goals.

What Is the 80% Rule and How Can It Help You Plan for Retirement?

The 80% rule suggests retirees aim to replace about 80% of their pre-retirement income to maintain a similar lifestyle. This is based on the idea that some expenses (like commuting) will decrease in retirement, while others (such as healthcare) may increase. Knowing how much money you should save for retirement can help you determine whether the 80% rule works for your situation.

Maintain Lifestyle:

The 80% target helps ensure you can maintain your standard of living in retirement, an important consideration when asking yourself, how much should you save for retirement?

Inflation:

It provides a buffer against rising costs over time, something you must account for when planning for retirement.

Adjust for Your Needs:

This rule is a guideline, not a one-size-fits-all. Depending on personal goals—such as travel, hobbies, or supporting family—you may need to aim higher or lower than 80%. When calculating how much to save for retirement, be sure to factor in these lifestyle desires.

What Does a Fulfilling Retirement Look Like to You?

While financial targets like 80% are helpful, retirement is more than just about covering expenses. It’s about enjoying the lifestyle you’ve earned, whether that means keeping your home in good shape, spending more time with family, or pursuing long-delayed passions. So, how much should you save for retirement will depend on what makes you feel fulfilled.

When planning for retirement, think about:

Maintaining or upgrading your home for comfort.
Traveling, taking on new hobbies, or spending more time with loved ones.
Supporting family members, like funding grandchildren’s education or charitable giving.
How much should you save for retirement? It will vary greatly depending on these personal factors.

How Much Should You Actually Save for Retirement?

To ensure your retirement is financially secure, aim to save a percentage of your income and grow your wealth:

Save 15% of Your Income:

Aim to save at least 15%, including employer contributions. Starting early helps take advantage of compound interest, which is crucial when you’re planning for retirement.

Retirement Corpus Goal:

By age 60, aim for 7-8 times your annual salary in savings. Alternatively, save 30 times your current annual expenses. These goals help ensure that you’re on track for retirement.

Tailor Savings to Your Goals:

Factor in lifestyle aspirations, debt, and healthcare costs when adjusting your savings plan. Be sure to account for these variables when planning for retirement.

How Will Healthcare Costs Affect Your Retirement?

Healthcare costs rise faster than inflation, so it’s crucial to plan ahead. This is a big factor when thinking about how much money you should save for retirement. Consider long-term care insurance or building an emergency fund to cover unforeseen medical expenses.

Smart Investing: How Much Should You Save for Retirement?
To maximize your retirement savings, start early and invest wisely. Consider:

Diversify: A mix of assets (stocks, bonds, etc.) helps balance risk and reward.
Tax Efficiency: Use tax-advantaged accounts like IRAs or 401(k)s to maximize your savings.
The earlier you start, the more your investments will grow, allowing you to save the right amount for retirement.

How Can You Plan for Supporting Your Family and Leaving a Legacy in Retirement?

Retirement is also a time to think about supporting family and leaving a legacy. Consider funding education for grandchildren or creating a will to ensure your assets are passed on as you wish. Retirement planning can also factor in the desire to leave a financial legacy.

Kapil Jain is the Director of Enrichwise Financial Services and Enrichwise Insurance Broking Services, an IIM Indore Gold Medalist in Finance and an investor for 25+ years.
For Tax Advisory and Investments contact +919821860804 or email planner@enrichwise.com