Have I Saved Enough for Retirement
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"Have I saved enough for
retirement?" is one of the most commonly
asked questions I hear as a financial counselor.
Your employee assistance program can help you figure
that out.
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The answer isn’t easy to come by and isn’t
always easy to hear, but as with everything else, the sooner
you know, the better. I have worked with hesitant clients that
turned out to be pleasantly surprised that they were, in fact,
on the right track to retire in style. On the other hand, I’ve
had clients that lagged behind where they needed to be, but
with a little determination and a few budget adjustments, they
were able to get back on track quickly. Still others have decided
they would need to work a few years longer than they had planned
or that they would work part-time during retirement.
No matter what the situation, talking with a
financial counselor will let you know what your options are
and give you piece of mind.
A financial counselor will walk you painlessly
through this step by step, but if you choose to do the calculating
yourself, here are the fundamentals to figure out if you’ve
saved enough for retirement.
Retirement Expenses
First, you’ll need to look at
what type of retirement you expect. Will you travel
constantly; will your children still be dependent on
you for support; will you downsize your home; will
you still have a mortgage payment? Although it’s
not an exact science, this gives us a good idea of
what your expenses will be in retirement.
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Next, look at your life expectancy. You don’t have a
crystal ball, but based on your health and your genetics, how
many years do you think you’ll live in your retirement?
Some retirees live 30 years after they have stopped working.
Based on your answer, we’ll assume the number of years’ worth
of expenses that you’ll need to fund during retirement.
Retirement Savings
You’ll also have to estimate the rate
of return you’ll get on your investments. Again, it won’t
be exact, but we can give you an idea of the rate of return
that the market has averaged based on how you’re invested.
The rate of return will help determine how quickly your investments
will grow through the years and how much of a lump sum will
be available when you’re ready to retire.
Another important piece to examine is how much
you are contributing to retirement accounts such as 401(k)s,
403(b)s, 457s, or individual retirement accounts (Roth or Traditional
IRAs). We’ll take these future monthly contributions
and add them to the amount you’ve already saved to come
up with a grand total of retirement savings that will end up
funding your expenses in retirement.
 Earnings
in Retirement
Next is to predict your income during retirement.
For instance, will social security still be around when you
retire? What is your monthly benefit expected to be? And does
it make sense for you to collect benefits as early as possible
or to wait until full retirement when higher benefits kick
in?
What other income can you expect, such as, pensions,
rental income, wages from working during retirement. We’ll
also look at taking a small percentage of your savings each
year to add to your income. Taking too much off the top will
deplete your savings too quickly, so we’ll need to look
at this closely.
Using a Retirement Calculator
If you choose to do the calculations yourself,
you can enter all of this information into a retirement savings
calculator such as the one at the Motley Fool’s website, www.fool.com and
search on ‘retirement calculator’.
Compare Retirement Income to Retirement Expenses
When you compare your retirement savings projections
and your income during retirement to your expenses in retirement,
it makes it all pretty clear. Either you’ve saved enough,
or you haven’t.
If you aren’t on track financially to
retire when and how you want, you can either tone down your
expectations for retirement, i.e., not travel as much or downsize
your home, save more during your working years, or work longer
into your retirement years. Either way, it’s good to
know early rather than to be unpleasantly surprised just as
you’re planning to retire.
A Tip for Parents
The biggest pitfall that sidetracks parents
from saving for their own retirement is that they spend their
own money helping their children, such as paying for their
child’s college, at the expense of saving for retirement.
If a parent has already saved enough for their own retirement,
then by all means, help the kids. But, if there’s any
reason to believe that your retirement savings won’t
be enough, then let the kids pay their own way and save the
money instead for your retirement. Kids can get loans to fund
their college costs, but once you’re into retirement,
you probably won’t be eligible for a loan.
Free Help is Available
Have I Saved Enough for Retirement?
How Can I Boost My Credit Score?
How Do I Get Out Of Debt?
I’m a Victim of ID Theft, What Do I Do?
What Are The Basics of Investing?
Free financial counseling is available for retirement
savings and other financial topics through your EAP. Call Mines
and Associates, your EAP, at 303-832-1068 or 800-873-7138 and
ask for financial counseling.
About MINES & Associates
For over 25 years MINES & Associates has
been a nationally recognized business psychology firm that
provides a variety of services to corporate employers including
employee assistance programs (EAP), managed mental healthcare,
organizational development and psychology services, wellness
programs, behavioral risk management, disease management, PPO
services, and a number of other technology based services.
MINES & Associates is divided into two main divisions,
Organizational Psychology and Health Psychology, and currently
serves a diverse portfolio of clients in all 50 states, Canada,
Mexico, and the UK.
Please log on to http://www.minesandassociates.com for
the latest news and information on MINES & Associates.
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