According to a recent survey done by the Employee Benefit Research Institute, Americans’ expectations for retirement remain low. The survey revealed the following:
- Twenty-eight percent of workers have no confidence they'll be able to afford a comfortable retirement. That's the highest level in the survey's 23-year history.
- Fifty-seven percent of those surveyed reported having less than $25,000 in savings and investments (not counting the value of their homes and any defined benefit pension plans.)
- Just 66% of workers said they or their spouse are saving for retirement, down from 75% in 2009. A mere 2% of workers said retirement saving and planning are their most pressing financial issues.
- More than half of workers, as well as 39% of people already retired, said they owe too much. And that's hampering their ability to deal with short-term financial emergencies and long-term goals like retirement savings.
- Only about half of workers and a comparable number of retirees said they could definitely come up with $2,000 if an unexpected need arose within the next month.
- Only 23% said they've sought advice from a financial advisor, and 45% admitted to guessing how much they'll need to save for retirement, instead of seeking advice from a pro or using an online calculator.
So how much money do you need to retire?
According to Clark Howard, a nationally syndicated consumer expert and host of The Clark Howard Radio Show, you should put at least 10% of your income toward retirement. If that's not possible, put aside what you can and bump the amount up another 1% every six months.
According to Forbes.com, you can determine the amount you’ll need to retire by comparing your income with your spending and doing some rough calculations (note: Forbes also recommends that you speak to a financial planner).
Steps recommended by Forbes.com
Step One: Figure out how much you have in savings and retirement accounts.
Step Two: Apply the 4% rule. Financial planners say you can withdraw (roughly) 4% to 4.5% a year from your accounts without outliving your money.
Step Three: Figure out Social Security. Go to the Social Security Administration’s website and compute your social security benefits using their retirement estimator. Delaying starting Social Security until age 70 will sharply increase your benefit. (Note: This is assuming Congress doesn’t make major changes to the program.)
Step Four: Figure out your pension. If you work for a company or organization, contact your human resources office and find out how much your monthly retirement benefits will be.
Step Five: Add it all together. The combination of retirement savings withdrawals, Social Security and pension is going to be almost all of your income.
Step Six: Figure out what you spend. Most financial experts say you need 75% to 85% of your final pay to maintain the same standard of living, although if you’re still carrying a mortgage, you may need 100%.
Step Seven: Subtract. Figure out the difference between your income and your expenses. Make sure you allow for taxes.
Step Eight: Zero in on your fixed costs. Fixed costs may include a mortgage, utility bills, and insurance premiums. Consider selling the house (usually a tax-free transaction) and renting.
Step Nine: Make more tough choices. If you still don’t have enough saved, consider working longer or spending less to make sure you don’t run out of money before you die.
Want to learn more about saving for retirement?
Click here to read Forbes.com’s Ten Steps to Getting Your Retirement Back on Track, and share what you learn with your family. It’s never too early to start teaching your children about saving for retirement.
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