Am I Saving Enough For Retirement?
A nightmare scenario: You save a portion of each of your paychecks for retirement. You invest frugally and work towards paying off outstanding debts and loans. Yet 10 or even 15 years into retirement, you are running low on funds, and you ask yourself, how did I reach this point?
Indeed, many Americans fail to fully prepare for retirement. Such may especially be the case for women, who are often paid lower wages than men for comparable work and who, due the demands of child-rearing, may not be employed for as many years of their working lives as their male colleagues. A recent study by BlackRock found that women between the ages of 55 and 64 have accumulated on average $37,100 less than their male counterparts.
Even if you’re saving some portion of your income, it can be hard to predict how much to save for retirement. CNN Money, Charles Schwab, Kiplinger, and a number of other organizations offer online calculators to help you make better predictions. WiseBread recommends having saved an amount equivalent to your annual salary by the time you turn 30, an amount twice your annual salary by the time you turn 40, and an amount four or five times your annual salary by the time you turn 50.
These estimates should take into account the amount you will lose to taxation. Even in tax-deductible accounts, you will likely have to pay income tax on withdrawals. Moreover, if you withdraw savings before you turn 59 1/2, you may have to pay a 10 percent penalty in addition to income tax. To learn more about these tax requirements, read the Advisor Letter in this month’s newsletter or reach out to us with any of your questions. Also remember that after you turn 70 1/2, you must withdraw from your retirement accounts each year or risk losing 50 percent of the amount that you were required to withdraw.
Beyond retirement investments, you can also learn more about the age at which you will be eligible for partial or full Social Security benefits by checking here. Keep in mind, the age at which individuals are eligible for full benefits has increased in recent years.
Beyond saving money, you should work towards being prepared to spend less money upon retirement. As of 2011, over 30 percent of Americans aged 65 and over still faced mortgage payments, with a median debt of nearly $80,000 — a significant increase from 2001. If you can budget more income for mortgage payments, auto loans, and other debts, you will find your funds far less strained later in life.
Of course, each individual’s situation is quite unique, and to best understand how much you should be saving for retirement and the pitfalls you may encounter along the way, we highly recommend you make an appointment with a member of the ELM3 team. We have the experience and knowledge to make the best recommendations for your situation and can save you the endless hours you might spend fretting over the future. With our comprehensive and personalized strategies, we will help you plan for a relaxing, rather than financially strained, retirement.
