How to Tell if You Are Saving Enough for Retirement
Few Americans know how much money they'll need to save for retirement. Some 44 percent of employed Americans -- and even 29 percent of those ages 55 and older -- admit they don't know how much money they will need in retirement, according to a recent ING Direct survey. Among those who have a retirement savings goal, a third of current workers 55 and older believe they need
Monitor current expenses.
Unless you're intending to enter retirement newly mortgage free or to downsize significantly, estimate that your expenses will remain largely the same in retirement. If you plan to travel or take up expensive hobbies, your cost of living may even increase. "Most people don't change how much they spend when they retire," says
Beginning to save for retirement as soon as you begin working full time is generally the best way to accumulate a large retirement account balance. "You should be saving a minimum of 10 percent of your gross income in 401(k)'s or taxable accounts," says
Most Americans don't have to finance retirement completely on their own. Some employees still have traditional pensions that guarantee income for life. Retired workers also received
Budget for taxes.
Your entire 401(k) balance isn't available for spending in retirement. Regular income tax is due on withdrawals from traditional 401(k)'s and IRAs. If you withdraw
Consider health expenses.
Healthcare expenses can make a huge dent in your retirement savings. Even after retirees qualify for
Picture your desired lifestyle.
A retirement spent traveling the globe or with an ocean view is obviously going to cost more than downsizing into a smaller house or condo. Those who choose a low-cost place to retire may be able to get by with significantly less money. "Someone who lives in a community in rural
Estimate life expectancy.
The wild card in retirement planning is how long you will live. Your nest egg must be divvied up to provide a stream of income that will last as long as you do. Spraker says retirement savers should plan on living into their 90s, while Stone recommends budgeting for age 100. Couples should also factor in the woman's typically longer life expectancy.
Personal Finance - How to Tell if You Are Saving Enough for Retirement
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