Are You Saving Enough For Retirement?
BOSTON (CBS) - My short answer: No!
There are 50 million 401(k) accounts with an average balance of just over $60,000, according to the Employee Benefit Research Institute. And those within 10 years of retiring have a bit more, $78,000. That's not enough!
Another study by Fidelity showed the typical working American household is on track to replace about 60% (58%) of their income in retirement. That's not enough!
According to a survey by the Employee Benefit Research Institute, EBRI, about 20% of workers between the ages of 40 to 59 have less than $10,000 in retirement savings. Another 20% do not have any savings. That's really not enough!
Your retirement savings will play a very big role in retirement; it will make a huge difference in your lifestyle during retirement. The difference could be summed up in where you choose to eat. McDonald's or the Olive Garden?
If you do retire at age 65 with only $60,000 in your 401(k) and you live to be 85, that $60,000 will only give you about an extra $3,000 in income annually, about $56 a week. That's barely gas money!
So how much money will you need for retirement? A lot! The first thing you need to review is your budget to see where you can save more. How much does it cost to maintain your current lifestyle? Is this the lifestyle you'll want in retirement? With a little bit of effort on your part, you will be able to calculate whether your savings are on track to reach your retirement goals.
There are many calculators online that can help you figure out how much more you need to save. Start with the company that is providing your retirement plan at work.
A good link with many different financial calculators on their website is Choose To Save. Check out their BALLPARK E$TIMATE to see if you are on track. And the large mutual fund companies have good educational retirement sections as well as calculators on their websites. Check out Fidelity and Vanguard as well.
If you are coupled, try doing the calculations together or each of you do one of your own and then try together. If you finish the worksheet and the results indicate that you must save more than is available from your paycheck each week, redo the calculations.
This time, add part-time work if you left it off the first time or raise your projected retirement age from 62 to 67. This will increase your years of savings and your Social Security benefits. If this still doesn't work, raise the retirement age to 70 and plan to work in your retirement.
Using these calculators helps you take the guesswork out of planning. They also force you to face the fact you are not saving enough, but allow you to change the parameters so you can figure how much longer you may need to work.
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You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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