Recently, the Employee Benefit Research Institute conducted a survey. The organization found that while most Americans are confident that they will have enough money for retirement, the fact of the matter is that just about no one does. Here is what MarketWatch reports on the issue of retirement savings:
Workers surveyed in the EBRI study tend to have little money set aside for retirement. Half have less than $25,000 in the retirement piggy bank, one in four have between $25,000 to $99,999 and one in four have $100,000 or more.
And the big reason why workers have such paltry savings, according to Matthew Greenwald and Jack VanDerhei, two of the study’s authors, is that few workers and/or spouses have ever crunched the numbers to determine how much they need to save for retirement.
Have you calculated how much you need?
How much retirement savings do I need?
The thing about personal finance is that it is becoming more and more personal. The old rule of thumb for retirement living was that you would need 70% of your current income. However with life expectancies stretching out (many people live beyond the “official” 81 for men and 84 for women), and our health general improving, retirement is no longer what generations before consider retirement. (Check this cool life expectancy game.) You need to consider your goals. You need to figure out what you want to do in retirement, and then plan for a more expensive lifestyle than generations before. If you want to do things like travel, then you may find that you need to plan for 100% of your current expenses.
The other thing you need to realize is that you will likely have increased medical costs. Look into different programs and consider whether long-term health care insurance may be necessary. After all, even if Medicare stayed as it is now, you would still end up paying $300,000 (per couple) for healthcare expenses. Take a good look at your coverage, and see if what you think is long-term care insurance really is.
Even though online retirement calculators are notoriously unreliable, they still offer you a general idea of what you might need. And the first step is getting a general idea of what you need in terms of retirement savings. Here is a Web site that offers links to some retirement calculators. Try two or three different calculators and combine the results, or take the highest amount. Then you have a goal to work toward.
Building your retirement savings
The next thing to do is to start building your retirement savings now. Look at your retirement plan’s maximum, and try to pay as close to that as you can every year. Also, get in the habit of saving. Part of building wealth and preparing for the future is spending less than you earn every month. You need to realize that Social Security might not be there (especially if you are under 40 right now), and you can’t really count on your company to have a pension plan to help you out. It’s all about what you can do NOW to build a foundation for later.