Most people understand the importance of saving for retirement and want to save more, but do not know where to begin. Furthermore, the economic downturn has resulted in fewer people putting away money for retirement.
The lack of retirement knowledge and individuals not doing a good job of saving and planning for retirement is reflected in two October 2010 surveys. Major findings from an online survey of 2000 adults (aged 21-65) released by the Teachers Insurance and Annuity Association-College Re tirement Equi ties Fund (TIAACREF), a national financial services organization, finds:
- 93% of participants know that saving is essential for financial security, but 82% admit that they do not know how much they should be saving
- 39% of participants are not saving at all for retirement
- 77% of participants report that they plan to save more for retirement next year
- 65% of participants say they will be unable to retire in the manner they hoped.
The 2010 Retirement Confidence Survey from the nonprofit research org anization Employee Benefit Re search Institute (EBRI) estimates that the nation’s aggregate retirement savings shortfall is $4.55 trillion. This translates to an overall average of $47,732 per individual aged 36 to 62 years. The survey included 1153 adults aged 25 years and older. Among the survey’s key findings:
- Only 16% of respondents report being very confident about having enough money to retire comfortably
- 69% of respondents report that they and/or their spouse have saved for retirement and 60% are currently saving for retirement
- 54% of respondents say that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000
- 46% of respondents report that they and/or their spouse have tried to calculate how much money they will need for a comfortable savings
- 24% of respondents report that they have postponed their planned retirement age in the past year.
The TIAA-CREF and EBRI surveys demonstrate that a majority of individuals need to put more thought and effort into their retirement savings. Determining how much to save depends on your situation and needs. Here are suggestions to help you plan more effectively for your golden years:
- Determine the age you want to retire and how much you will need in retirement. If you plan to retire before age 65, you may need a more aggressive savings plan. Think about the lifestyle you want during retirement. Do you plan to travel more or indulge in expensive hobbies? Will you continue to work part-time for an employer or on your own?
- Calculate the cost of retirement once you determine the lifestyle you want. Consider the additional health care costs that often accompany aging and determine the income you will need for these expenses.
- Identify your sources of retirement income, including your personal savings and investments, your IRA, 401(k), or other employee-sponsored plans, and Social Security. How much income will these sources provide? Determine the amount and frequency of withdrawals you will need from these vehicles without depleting them.
- Review your portfolio and adjust your savings and investment strategies if you do not think you will have enough to meet your retirement needs.
- Monitor your progress. Once strategies are in place, you will need to follow your progress to make sure you are on track to reach your retirement savings goals. Keep in mind that you will probably need to make adjustments in your planning to reflect market changes and family needs.