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Saving for Retirement: What’s Enough?

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According to the Federal Reserve, nearly half of households with members between 50 and 64 years of age have less than $10,000 in retirement savings. If you’re in this group, you’ll likely need to save more, but how much is enough? Experts at Fidelity Investments urge its clients to save 10 times their income by the time they are aged 67. This means that if you have an annual income of $60,000, you will need to have $600,000 saved. This is just a guideline. If you have a pension, for example, the math is different.

But if you fall short of that number, do not despair. As a matter of fact, some 45% of baby boomers claim they are up at night worrying about outliving their retirement funds. This situation is realistic because the average baby boomer has saved only $144,000.

Luckily, there are still steps you can take to head in the right direction financially that will help you sleep better at night. Here are a few pro tips to get you started:

If you have not retired yet

Create a detailed budget that includes all the essential and discretionary expenses you expect to have in retirement. You may want to include some possible unexpected expenses, such as medical care, family obligations, home and car maintenance, or investment losses. Consider where you want to live and how much income you will need to support that lifestyle. If the budget isn’t balanced, review the list of expenses to see where you can cut back. At this preretirement stage, there are still ways to increase income, starting with getting a second part-time job. You will also want to look at your current expenses and see where you can cut down on spending. Financial professionals advise waiting two weeks before buying anything unessential to see if you still want it.

If you are already in your 60s

You may want to put off retirement for a few more years. Bringing in more income allows you to set aside more money for retirement to improve your financial situation. You may want to also postpone collecting Social Security benefits until you are age 70. For every year you do not collect past age 62, the age of eligibility, you receive an increase of 8%. If you are relying on Social Security as your main source of income, you will need to manage it very carefully to cover your monthly expenses.

If you are a homeowner

Do not discount your home’s status as an asset. You may find that over time your home has become too large for your needs and that downsizing is the way to go. You can sell your home and take some of the proceeds to purchase a more affordable home and place the rest in savings. If you choose to stay in your home, consider taking in a renter to share the space and generate income.

Retirement should be the hard-earned reward for a lifetime of working, not a time of financial struggle. The sooner you start saving and planning for retirement, the better. And be sure to get professional guidance. Most people nearing retirement age need an estate plan. Whether you have not considered setting up a plan and need guidance, or have an existing plan that needs updating, we’d love to work with you. Give our Petaluma, CA office a call or email to register for an upcoming introductory webinar or seminar.

 

Miranda Dressler
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