Editor’s Note: Briant Sikorski, from Stratos Wealth Partners in Cary, contributed this article.
Cary, NC — Even though calculating a retirement savings goal is key to pursuing and maintaining a confident financial outlook, just 46% of American workers have figured out how much money they will need to accumulate for retirement.* More than half admit that they are behind schedule when it comes to planning and saving for retirement.
It’s important to realize that the exercise of calculating a retirement savings goal does more than simply provide you with a dollars-and-cents estimate of how much you’ll need for the future. It also requires you to visualize the specific details of your retirement dreams and to assess whether your current financial plans are realistic, comprehensive and up-to-date.
These action-oriented strategies will help you identify and pursue your retirement savings goals.
Double-Check Your Assumptions
Before you do anything else, answer these important questions:
- When do you plan to retire?
- How much money will you need each year?
- Where and when do you plan to get your retirement income?
- Are your investment expectations in line with the performance potential of the investments you own?
Use a Proper “Calculator”
The best way to calculate your goal is by using one of the many interactive worksheets now available free of charge online and in print. Each type features questions about your financial situation as well as blank spaces for you to provide answers.
An online version will perform the calculation automatically and respond almost instantly with an estimate of how much you may need for retirement and how much more you should try to save to pursue that goal. If you do the calculation on a paper worksheet, however, you might want to have a traditional calculator on hand to help with the math.
Remember that your ultimate goal is to save as much money as possible for retirement regardless of what any calculator might suggest.
Are you among the almost three quarters of retirement savers who say they could set aside an extra $20 each week? If so, here’s some motivation to actually do it: Contributing an extra $20 each week to your plan could provide you with an additional $51,389 after 20 years or $130,237 after 30 years, assuming 8% annual investment returns.**
At the very least, you should try to contribute at least enough to receive the full amount of your employer’s matching contribution. It’s also a good idea to increase contributions annually, such as after a pay raise. Retirement will likely be one of the biggest expenses in your life, so it’s important to maintain an accurate price estimate and financial plan.
Make it a priority to calculate your savings goal at least once a year.
*Source: Employee Benefit Research Institute, 2013 Retirement Confidence Survey, 2013.
**This example is hypothetical and for illustrative purposes only. Investment returns cannot be guaranteed.