Figuring out how much money you may need in retirement income is an important factor in determining how much you need to save now. Assume you want to retire at age 67 and may live until your 93rd birthday. Fidelity took a look at how much 401(k) investors at various ages would need to save for every $1,000 they'll need to generate in retirement income to make their money last, assuming a 5.5 percent annual return and not taking taxes into account. Here's what the analysis showed:
- A 25 year old just starting to save would only need put away about $160 each month to generate $1,000 in monthly retirement income.
- Start saving at age 35 and you'll need to contribute almost $270 a month to generate the same income.
- For every $1,000 in monthly income, a 45 year old just beginning to save for retirement would have to put away nearly $500 every month.
- A 55 year old just starting to build a nest egg would have to make monthly contributions of $1,154 for every $1,000 in monthly retirement income -- that's double the amount of a 45 year old and more than seven times the sum that a 25 year old would need to stash away.
Source: Sharon Epperson, "How to Not Outlive Your Money: Don't Wing It On Your 401(k)," CNBC, August 27, 2013.
