For many, that is the question that you will constantly ask yourself over your working life. The bad news is that the vast majority of people do not feel that they will be able to retire comfortably. The Employee Benefit Research Institute recently released the results of a retirement survey that stated that only 13% of Americans feel "very confident" that they will have a comfortable retirement. Even more sobering is that 28% of Americans feel "not at all confident" in a comfortable retirement and 21% are "not too confident." So what do need to do if you are in the 49% that have little to no confidence in your retirement?
Find Out How Much You Need To Retire
If you're saving and planning for your retirement, it's important to find out how much you need to retire. It's hard to know when you're going to hit the finish line when you don't even know where it is at. You could spend all day crunching numbers to determine how much you need because everyone is different. However, here are some general tools to help you get started:
- Find a retirement calculator, like this one on FINRA's website (Financial Industry Regulatory Authority). It will take some tweaking to feel comfortable with the numbers you are putting in there, but playing around with it will give you a good start.
- Another tool, from Fidelity, shows how much you should currently have saved based on your current income. For example, if you are 30 years old, they recommend that you already have .5 times your salary invested for retirement. If you're 35, they recommend you have 1 times your salary invested. To see where you stack up, look at the diagram below. As mentioned, all calculations are simply a set of assumptions, so check out the article on Marketwatch to find out how they calculated this and what their assumptions are. If the assumptions don't fit you, you'll have to keep the analysis going.
- If you are not a numbers person or thinking about all of these financial calculators will make your head explode, a decent general guide is that you will need 75-85% of your current income (each year) to retire. A different approach is to try to calculate what your yearly expenses will be in a given year when you retire, and multiply that number by 25. Yes, these are very rough numbers but they get you started in the right general direction.
If You Haven't Started Saving, START NOW
There are many reasons not to save. Bills need to be paid, debt continues to pile up. We can all come up with a million excuses. However, there are so many people that I talk with that wish they had saved up more money when they were younger. For those of you that are younger, particularly in your 20's and 30's, you have the best thing going for you - TIME.
If you can't find a way to free up some money to save, the real answer is that you can't afford not to. I recently read a great article called, Trick Yourself Into Saving More. Here are some tips that they recommend to give your savings a boost:
- Start by saving $50-100/month. Have it automatically deducted from your account so that you don't even see the money. Increase that by $10-25 a month or quarter to slowly grow to save more each month
- Have your savings boost coincide with a raise at work. Try to have 50-75% of your raise go to additional savings, especially if you're already comfortable with your current lifestyle
- If you refinance your house and free up some cash, turn that right around a put that savings to pay over and above your mortgage - or in this case we can use that same application and use it to put toward your retirement account. (Side note: We personally refinanced a few months back and did that. We haven't even noticed the difference, but the big beneficiary of that decision is our retirement account. It's been a nice extra boost.)
Remove Other Hurdles In Your Way (i.e. DEBT)
It's tough to feel good about saving for retirement when you're staring at mortgage payments, credit card payment, car payments, perhaps a Target or Old Navy card, or other debts that you have to pay off each month. See what you can do to eliminate a couple of those. Once some debt starts to get paid off, you'll have the confidence you need to put more money into your retirement, thereby increasing your confidence in your retirement savings. We can't just close our eyes and open them at retirement and hope we have enough saved. Get that debt out of the way and boost your savings.
My vision at Financially Relevant is that we can experience JOY and FREEDOM when we put practices in place to live a life that is financially-wise. Hopefully with that will come CONFIDENCE in our retirement planning as well. We can't predict what the future will hold, but through planning and diligence, we can start with small "wins" and build that up over time so that the wins keep getting bigger and bigger.