Saving Money For Retirement

Saving money now for a goal that’s far off in the future is not an easy thing to do. There are plenty of urgent needs competing for your hard-won paycheck already—bills, cars, a house, braces for the kids and college leap instantly to mind for most young parents. And most of us would rather avoid thinking about saving for a day that may be 30 or more years away.

Still, the vast majority of us are going to live to retirement age, so it’s wise to plan ahead. And there’s good news: when you start early, you won’t have to save nearly as much as if you wait.

How Much Is Enough?

You pay your dues, you work hard all your life, and when you retire you deserve to have some fun. When saving for retirement, don’t just save the minimum amount you’ll need to get by. Save enough so you can visit the grandkids, tour the country on a Harley or play golf every day—whatever you’ve always wanted to do.

According to Ginita Wall, co-author of “Your Next 50 Years: A Completely New Way To Look At How, When And If You Should Retire”, when planning for retirement you may be better off planning to replace 100 percent of your annual income when you retire. This is significantly more than the 70 or 75 percent commonly recommended. Why? People are living longer, healthier, more active lives.

How Much Will I Need To Save?

There are several factors that go into determining how much you’ll need to save: your retirement lifestyle, your income, your company pension, how long until you retire, how long you can expect to live, the rate of return on your investments and how much you’ve already socked away.

Most personal finance magazines like Money or Kiplinger’s include a retirement worksheet on a regular basis—you can find back issues at your local library. Or, better yet, if you can go online, visit the magazine’s Web site (for example, www.kiplinger.com) and complete the worksheet online. They’ll do all the calculations for you, and in just a few minutes you’ll have a ballpark estimate of how much you’ll need to retire and how much you should be saving each year to reach your goal.

And don’t worry if the number seems unreachable now. Start a sensible retirement savings plan today and slowly work toward that goal.