Figuring out exactly how much you need for retirement can be tricky. Most people avoid the subject because it can be too stressful, or they think it is too far in the future to worry about. According to a Yahoo finance survey, 64% of Americans will retire with less than $10,000 in their retirement savings while 45% say they don’t save because they feel they don’t make enough money. You may feel the same way, but there is hope! This article will help get you on the right track and in the mindset of saving for retirement.
The big question is when the time comes to retire will I have enough? A lot of big investment companies or advisers tell people they need a significant amount of money in order to retire. That might not be true for you and your situation, you may need more or less than their magic number. Retirement is very personalized so don’t get discouraged when you hear those numbers.
The biggest step in starting to save is calculating how much money you think you will need to comfortably live off of in retirement. Here are some things to consider for your post-retirement lifestyle expenses on top of your everyday living costs:
· Will your house be paid off by then?
· Are you planning on traveling more?
· Is there family you plan to help support such as a grandchild’s college education?
· Healthcare costs for you and/or your significant other may increase with age or deteriorating health
No one can determine exactly what your expenses in retirement will be, but you can get a good idea to set a goal. The next step is making sure you can reach that goal by your targeted retirement date.
According to the CDC, the current life expectancy in the U.S. is around 79 years old. So, if you want to retire by age 60, you will need to fund your retirement for approximately 20 years of expenses. Is this attainable with what you are currently contributing? Will you need to increase your contributions or push back retirement a few years to reach your goal? The best way to figure this is by using a retirement calculator that includes compounding interest like this one here. Remember to take advantage of any contribution matching at your job and put as much back for retirement as you can. Starting to save for retirement at a young age is key but it is never too late to start.
We need to change how we think about retirement and make it a here and now mind set by working retirement savings into your budgeting now. Can you make coffee at home instead of hitting up the coffee shop and paying $5? You could add that money to your retirement fund which will grow with time. Budgeting is an important step to include in your retirement planning.
The most important factor in retirement savings is actually saving! Pick a goal, budget to help your contributions reach that goal, and stick to it. You will be surprised just how fast that money grows with compounding. Retirement is not a race you cannot sprint through; it is a long-term plan that requires you to pace yourself. If this still sounds too overwhelming reach out to your retirement plan company or a trusted adviser, they can help guide you in the right direction.
If you need help finding one feel free to contact us for a recommendation.
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CDC life expectancy - https://www.cdc.gov/nchs/products/databriefs/db355.htm