Many baby boomers are beginning to worry that they may not have enough money saved for retirement. In fact, over half of all those expected to retire in the next 5 to 10 years say that they won’t have enough saved up by the time they are ready to retire.
The weakened economy has affected the savings accounts of many, and the growth many had expected to see didn’t occur. Although the economy is to blame in part for the low balances of some retirement accounts, most of the blame falls on the future retirees themselves. The fact of the matter is that most people don’t take control of their retirement funds until it is too late. They become overwhelmed at the prospect of retirement planning and simply give up, or close their eyes and hope the meager accounts they started will cover their expenses later in life.
However, retirement planning doesn’t have to be so intimidating. There is even still time to save yourself from working until you are 90. You just need to make intelligent saving decisions that will help you optimize the interest you make each month. To determine if you are currently on track for retirement, complete the following steps:
Determine Your Need
It’s as simple as it sounds. Determine the amount that you believe you will need annually to live comfortably off of. Your expenses should include your mortgage, utilities, groceries, health care expenses and other costs of living. If you will be helping a child through school during your retirement, you should also factor that cost in as well.
Factor in Social Security
If you don’t already know what Social Security will be sending you each month, you can easily look it up online on the Social Security website. They offer online calculators to help you determine what you will be receiving from the department. After you determine the annual amount social security will give you, subtract it from your desired annual retirement salary.
Subtract All Other Forms of Income
If you happen to have a traditional retirement pension plan, go ahead and determine how much you will be receiving from that annually. Once you figure that amount, subtract it from the sum acquired from above. So if you needed $50,000 annually to live and social security will be providing $15,000 and your pension will be providing $10,000, you will now have $25,000 left.
Determine Amount to Save
Now take that $25,000 and times it by 20. Why 20? Because most people live into their 80s and you don’t want to run out of money. The 20 signifies twenty years of life after retirement. The result from taking 25,000 by 20? $500,000. $500,000 is how much you will need to save over the course of your working life to be able to enjoy an annual retirement salary of $50,000.
How much of that amount do you already have saved? You may find that you are right on track; however, if not, call a financial planner. They may be able to help you get on track so that you can have the retirement that you want.