How To Know If You Are Behind Or Ahead In Your Savings
Creating wealth is a sprint and remaining concentrated for decades can feel exhausting and discourage our efforts. Because retirement sometimes seems farther down the line than we like to think, many Americans believe that there’s more time to save than there actually is. In fact, according to a 2019 survey conducted by Ameritrade, 6 out of 10 Americans say they are behind and need to catch up on their savings, even though 38% of them said they started investing at an early age. This same survey found that only 68% believe that they could confidently retire at the age of 65. Considering most financial experts widely agree that most of us will need at least one million dollars saved up by the time we retire. So how do you know If you are ahead or behind on your retirement savings?
There are many tools that can help calculate how much you should be saving but they all pretty much use the same factors to help you figure this out. A good place to start to evaluate this is to consider your current age, how much you already have saved, and your current annual income and projected future annual income. If you’ve already been saving for retirement, you may be ahead depending on the same factors.
For example, if you are 30 years old right now (with no prior savings) earning $50,000 annually and saving 15% of this each year, you will only have $225,000 to live off by the traditional retirement age of 65. In this example, we aren’t factoring in 401K matches, investments, assets, or social security payments. But even including these factors, this still isn’t enough to keep you afloat during retirement alone. Using traditional standards you’ll still need $775,000 to comfortably retire. This may seem like a lofty goal but it is quite achievable if you act sooner than later.
Next, consider how much money you will actually need to live comfortably in retirement. Will you still be paying a mortgage, do you plan to travel, how will you manage healthcare expenses? These are all key factors to determine how much you should be saving each month. You will also want to factor in a good prediction on the length of your retirement. Although the accuracy of this figure may be off because we don’t realistically know how long we will live and we can’t predict unexpected life events, we can make a ballpark guess.
Letting too many months or years go by without reevaluating where you stand for your retirement savings could cost you. Understanding where you are with your savings goals is vital because it enables you to strategize on how you can retire successfully. Working with one of us on the SJK Wealth Management team can help put you on the right track as you look forward to a successful retirement. We can put your money to work for you by investing and finding other ways to help you map out your retirement plan. Speak with us today to learn all of the options that are available to you.