By Scott Ford, CEO, Founder & Wealth Advisor of Cornerstone Wealth Management Group
Many of us have lofty retirement dreams and as we go about our working days, we look forward to the years where we can reap the fruits of our years of labor. But have you thought about when you want to retire? Is it just some vague dream or do you have a set age in mind?
Since you need to finance your retirement somehow, have you figured out how much you need to save to retire when you want to?
According to the Employee Benefit Research Institute’s (EBRI) 2016 retirement confidence survey, 77% of workers polled said they expect to retire at a later age than they previously planned, and all of their reasons had to do with uncertainty regarding finances. Do you have a plan in place that will allow you to retire on time?
Knowledge is Power
According to the same EBRI study, 48% of workers have never calculated how much they will need to live the way they want to when they retire. If you don’t know how much you need, how will you know how much to save? Unfortunately, determining your savings goals isn’t as easy as plugging some data into an online calculator. There are multiple unique factors involved that will affect the outcome, such as years from retirement, current savings, the economy, and retirement lifestyle expectations.
The advice from many financial professionals across the board is to save 10-20% of your income towards retirement, but even that is an imprecise generalization. If you start saving in your 20s, 10% might serve you well due to compound interest, but if you are getting a later start, you will need to save more. What steps can you take to ensure that you will be able to retire when you want to?
Know Your Savings Benchmarks
While charts and calculators won’t speak to your personal situation, they can give you an idea of what your savings should look like if you want to meet your goals. Take a glance at the chart below. Instead of showing you what you should save monthly from here on out until retirement, it lets you know if you are on track by looking at what you have saved up until now. From there, you can evaluate what you need to do if you are behind.
Using a benchmark like this one personalizes your progress by reflecting how much you will need in retirement based on your actual circumstances. Many people rely on Social Security or pensions to provide the bulk of their retirement income, but the more you earn, the less Social Security you will receive, so what you need to save to retire on time will change based on your pre-retirement income.
Maximize Your Savings
There are many uncertain factors when it comes to your retirement financials, but one thing you can control is how much you save. Social Security may change, inflation will increase living expenses, medical costs are unpredictable, and what the economy will do is anyone’s guess. But if you consistently save as much as you can, you are setting yourself up for success. If you already feel maxed out in your budget, make it a habit to save any extra money that comes your way, whether it’s a bonus from your employer, an increase in pay, or a tax refund.
When determining what you need to retire, plan on a minimum of $15 to $20 of savings per dollar of the shortage between your Social Security and/or pensions and your retirement living expenses. For example, if your calculations show that your retirement expenses will be $25,000 a year more than is coming in from outside sources, you will need at least $375,000 to $500,000 in savings to ensure you can afford your current lifestyle. The more you save, the more you are in control of your financial future.
Reassess Regularly
Life moves along rapidly and brings many changes along with it. Once you’ve set your goals and calculated how much you need to save, make it a habit to reevaluate once a year to make sure you are still on track to meet your benchmarks. It’s also a good idea to reassess your progress if you go through any life transitions such as a job change, marriage, divorce, or having a child.
Take the First Step
One in four people has no idea how much they should be saving for retirement. If this is you, the first step is to consult with a financial professional. If you do know what you are aiming for and are doing your part to reach your goals, we can help you stay on track and find ways to boost your savings. No matter how old you are or how little you have saved, it’s never too late as long as you get started today. Contact me at (301) 739-8505 or by email at [email protected] and let me help you reach your goals so you can spend your time on the things you love.
ABOUT SCOTT
Scott Ford is CEO, Founder and Wealth Advisor of Cornerstone Wealth Management Group, serving entrepreneurs, business owners, executives, and their families. The firm specializes in business liquidity strategies and SBA financing strategies. It is Scott’s mission to help his clients pursue financial freedom and live a balanced and fulfilled life.
Scott is a Wealth Advisor and Registered Financial Consultant (RFC). He was recognized as one of the 20 Rising Stars of Wealth Management by Private Asset Management Magazine in 2008 based upon assets managed of $1 million or more per client. Since 2005, Scott has been an active financial technical analyst.
Clients often choose to work with Scott because of his experience with the challenges business owners and executives face as well as his firm’s disciplined process. His personal and proactive approach is designed to bring clarity and simplicity to the complex issues of financial management. For over 20 years, he has been helping his clients define and pursue their own unique version of “True Wealth.”
Scott is the author of three books: Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances, The Widow’s Wealth Map: Six Steps to Beginning Again, and the New York Times Bestseller, The Sustainable Edge: Fifteen Minutes a Week to a Richer Entrepreneurial Life.
He and his wife, Angie, reside in Hedgesville, WV and have two wonderful children as well as a dog and a cat. In addition to spending time with his family, Scott is a voracious reader and enjoys woodworking, Brazilian Jiu-Jitsu, golf, hunting, permaculture and beekeeping; basically anything outdoors.