Three easy steps to calculate how much money you need to save for retirement

Whether you just entered the workforce, or you’re currently nearing retirement, one big question that you may have is how much money you’re going to need to save.

Unfortunately, there isn’t one magic number that everyone can go by. Every single person is different, so we’re going to focus on 3 specific steps to help you calculate how much money you need to save for retirement. By using these steps, you’ll be able to formulate some of the knowledge that you need in order to plan effectively.

Step 1: Determine the type of lifestyle you want to live during your retirement years. This step is essential, because if you aren’t sure of the type of lifestyle you want to live, it will be difficult to determine how much money you actually need to save. For example, if you plan on staying in your current home, which will be paid off by the time you retire, you will more than likely need less money than you would if you decided to travel the world, or buy a new home on the beach to retire in.

Step 2: Now that you have a general idea on the type of lifestyle you want to live during retirement, it’s time to determine how much it will cost you. Make up a list of the expenses that you know you will have during retirement – don’t forget to include expenses like medical, average food costs, energy costs, and other day to day living expenses.

Step 3: Now that you know what type of lifestyle you want to live, and you also have a general idea of what your expenses will be, it’s time to do simple addition and subtraction. Don't want to waste time on the maths? Check out ASIC’s retirement calculator for efficient calculations!

Not sure you need to worry about retirement savings yet? Check out our blog on financial topics that are often ignored, (but shouldn’t be!)