Usually, a retiring person would want to experience a lot on his/her late years. This usually includes a worry-free living, long and refreshing vacations, and the luxury of buying different material things that he/she wants to have. But in order for one to be able to do this, he/she needs to earn enough money during his career days. And enough is not enough on this generation.
So, the question is, how much should a person save to enjoy his/her retirement? How expensive does retirement really have to be? Well, it all depends on how you would want to live during this time of your life. Will you live luxuriously? Will you go at average with the standards? Or will you live simply only to suffice your needs?
If you want to live comfortably, it is recommended that you use the 70-80% rule. This rule is simple. You need to take this step on the 5-10 year mark before you retire. During this period, you need to save 70-80% from your annual income on every year of the said mark. For example, your annual income is P1 million, applying this rule, you will be able to save 700k-800k every year. This does not need to be a fixed monthly savings, but at the end of the year, you need to have 70-80% of the year’s total earning locked down to your account.
This will be enough to cover your expenses including needs and wants. If you think your annual income is a little too small for this, you need to rethink a little on your pre-retirement period and get a higher paying job. Retirement needs to be well-funded as you will be relying solely on the money you have saved during these years.
Retirement is indeed one huge step in someone’s life. But if you plan ten years or more ahead, you will be seating on your couch happily in no time.