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. Retirement Planning

    The process of determining retirement income goals and the actions ...
  2. Dynamic Updating

    A method of determining how much to withdraw from retirement ...
  3. Excess Accumulation Penalty

    The penalty a retirement account owner or the beneficiary of ...
  4. Retirement Readiness

    The state and/or degree of being ready for retirement. Retirement ...
  5. Financial Health

    A term used to describe the state of one's personal financial ...
  6. Safe Withdrawal Rate (SWR) Method

    A method to determine how much retirees can withdraw from their ...
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. How do I retire?

    When considering how to plan for retirement, firstly think about the age at which you want to retire and the lifestyle you ... Read Answer >>
  3. Why should I open an IRA?

    Understand the benefits of an IRA, how it enables you to increase retirement savings and how funds can be used before retirement ... Read Answer >>
  4. Can I take my 401(k) to buy a house for my children?

    Find out how you can use your 401(k) savings to fund the purchase of a home for your children, including the basics of standard ... Read Answer >>
  5. 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 >>
  6. 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 >>

You May Also Like

Trading Center