Your Journey To a Financially Secure Future
Let’s take a closer look at two of the many questions plan participants face on their journey:
- How much do I need to save to retire comfortably one day?
- How do I actually get there?
How Much Do I Need To Save For Retirement?
The answer is far from simple and has many variables, such as:
- When will you retire?
- How long will you and your spouse/partner live?
- What kind of spending habits will you have?
- How much will you need for healthcare costs?
To get a better picture of your unique situation, consider overall assets, balances held in IRAs and other qualified plans, any spousal financial information, estimates on social security, and more. Many financial planners will tell you that if you can accumulate ten to twelve (10-12) times your annual compensation in combined assets (including any Social Security and outside pensions), you might be “retirement ready” if you retire at age 67. Note: Given that there is a baseline cost of living today, most financial planners feel that there needs to be a minimum floor to this calculation, such as $750,000 in combined assets to meet the test. If employees retire at a time when they are earning $20,000 a year, it is hard to imagine they could live for 15 or 20 years on $200,000 in total assets. In such a case, the ten-times pay figure may be 15 or 16-times pay for lower wage earners to account for this minimum cost of living.
How Do I Reach The Ten Times Pay Goal?
Many financial planners will tell you that if you can invest 10% of your compensation for a 35 or 40-year working career, you can reach your retirement readiness goal. What changes can you make if you’re not on target?
- Increase your savings rate (even if it is over a several year period)
- Delay your anticipated retirement date to a later year
- Contribute at least enough to get the full amount of any employer matching contributions. Always remember — the biggest contributor to your retirement success will be YOU, not investment returns or employer contributions. The more you save, and the earlier you start, the better.
See examples of how a few employees worked toward their goal of ten-times pay: