Retirement Planning For 20-Somethings: How Much Should You Add To Your Retirement Nest Egg?
  1. Retirement Planning For 20-Somethings: Introduction
  2. Retirement Planning For 20-Somethings: When You Should Start Planning
  3. Retirement Planning For 20-Somethings: Goal Setting
  4. Retirement Planning For 20-Somethings: Saving Options
  5. Retirement Planning For 20-Somethings: Choosing Savings Accounts
  6. Retirement Planning For 20-Somethings: How Much Should You Add To Your Retirement Nest Egg?
  7. Retirement Planning For 20-Somethings: Signing Up For Retirement Savings Accounts
  8. Retirement Planning For 20-Somethings: Choosing And Managing Your Investments
  9. Retirement Planning For 20-Somethings: Incorporating Lifecycles In Your Planning
  10. Retirement Planning For 20-Somethings: Retirement Resources
  11. Retirement Planning For 20-Somethings: Conclusion

Retirement Planning For 20-Somethings: How Much Should You Add To Your Retirement Nest Egg?

There are differing opinions on the percentage of pre-retirement income an individual will need to finance his or her retirement years. Ultimately, your needs will depend on your planned retirement lifestyle and the amount that would be required to finance such a lifestyle. However, a reasonable estimate can be made so as to design and implement a suitable retirement program. While it is important to add as much as you can to your retirement nest egg, care must be taken to ensure that you do not add more than you can afford, as doing so can negatively impact your financial profile and the amounts that you can afford to add in future years. To determine how much you can add to your retirement savings accounts, prepare a budget to show how much you have available to save.

When creating your budget, be sure to include details about all sources of income and all expenses, as well as your long-term and short-term financial goals. This will help you to determine how much to allocate to your long-term and short-term savings. If necessary, consider cutting back on non-essential expense items to increase the amount available for funding your retirement accounts.

Outstanding debts should not be ignored as the repayments are part of your expenses. If your amount of outstanding debt is high, you may need to implement a debt management strategy to help you pay off your debt quickly.

The Negative Impact of Saving Too Much
Saving more than you can afford may result in a shortage of funds to cover your ordinary expenses. This shortage may result in you being forced to make unwise financial decisions, such as withdrawing amounts from IRAs or using credit cards to cover expenses that should be covered with your income. Withdrawals from your IRA would be treated as ordinary income on your tax return for the year and may be subject to a 10% early distribution penalty. Amounts charged to your credit would accrue interest, which can add up to a significant cost if the balance continuously increases. If this becomes an unmanageable debt, it could force you to allocate amounts towards paying down the debt instead of adding those amounts to your retirement savings.

Retirement Planning For 20-Somethings: Signing Up For Retirement Savings Accounts

  1. Retirement Planning For 20-Somethings: Introduction
  2. Retirement Planning For 20-Somethings: When You Should Start Planning
  3. Retirement Planning For 20-Somethings: Goal Setting
  4. Retirement Planning For 20-Somethings: Saving Options
  5. Retirement Planning For 20-Somethings: Choosing Savings Accounts
  6. Retirement Planning For 20-Somethings: How Much Should You Add To Your Retirement Nest Egg?
  7. Retirement Planning For 20-Somethings: Signing Up For Retirement Savings Accounts
  8. Retirement Planning For 20-Somethings: Choosing And Managing Your Investments
  9. Retirement Planning For 20-Somethings: Incorporating Lifecycles In Your Planning
  10. Retirement Planning For 20-Somethings: Retirement Resources
  11. Retirement Planning For 20-Somethings: Conclusion
RELATED TERMS
  1. Dynamic Updating

    A method of determining how much to withdraw from retirement ...
  2. Retirement Readiness

    The state and/or degree of being ready for retirement. Retirement ...
  3. Lifestyle Inflation

    Increasing your spending when your income goes up. Lifestyle ...
  4. Retirement Planner

    A practicing professional who helps individuals prepare a retirement ...
  5. Lifestyle Creep

    A situation where people's lifestyle or standard of living improves ...
  6. Financial Health

    A term used to describe the state of one's personal financial ...
RELATED FAQS
  1. What are the best ways to plan for retirement?

    Learn the basic steps to creating a solid retirement plan that can support you and your family, and find out how to manage ... Read Answer >>
  2. Should I put money into a retirement account even if it isn't tax deductible?

    One of the biggest and most often-touted advantages of putting money into a retirement account is the tax savings that come ... Read Answer >>
  3. What is the size of the average retirement nest egg?

    Learn about the average nest egg for retiring Americans and why you certainly do not want to be average when it comes to ... Read Answer >>
  4. I want to close my IRA account. What percentage will I lose to tax?

    You can move the amount by means of a trustee-to-trustee transfer to another IRA, or roll over the amount to your 401(k). ... Read Answer >>
  5. How should I invest the extra cash?

    I am a 55 year old man, making low 6 figure income. I contribute 30% to my 401k Read Answer >>
  6. What does a sample plan using the 4% retirement rule look like?

    Discover how the 4% retirement rule can work as part of a plan to achieve increasing retirement income if investments perform ... Read Answer >>
Trading Center