So you’re approaching the half-century mark, and the not-so-distant mirage of retirement appears on your horizon. Is it real, or is it just that—a mirage that will fade as you get closer? A lot depends upon how much money you’ve been able to sock away during your working years.
If you’re like many Americans, you may not be anywhere close to having enough to hang it up when you reach retirement age. According to the Employee Benefit Research Institute, among those who consistently saved money in 401 (k) plans between 1999 and 2006, balances averaged $121,202.
Now, are you ready for the reality check? For every $1,000 a month that you want to collect in retirement, you'll need to have put aside about $200,000, invested conservatively to get a 5-6 percent rate of return. So if you want to have an income of $72,000 a year ($6,000 a month), you should have about $1 million to $1.5 million saved in your retirement account. This does not include any anticipated benefits from Social Security.
But do you really need that much? A lot depends upon how you answer questions like: What does retirement mean to you? Do you want to work? Where do you want to live? How do you want to spend your time? What do you think you will be spending your money on? You may be able to get by on less than that, depending on your lifestyle. Regardless, if you’re approaching 50, how should you be saving for retirement to maximize your nest egg?
According to Forbes magazine, there are a few things you should do right away.
Switch on the Turbocharger If the calendar doesn't focus the mind, your eyes aren't open. If you haven't started saving and investing for retirement, it's time to get busy. You probably won't be able to retire at 65, but with careful planning and shrewd investments, you can call it a career in your 70s.
Check the Actuarial Tables The average life span is increasing. What was a sufficient retirement plan in the past may not cover the additional years many are expected to live in the future. This means setting aside more money now.
Be Realistic A late start limits your options. Focus on what can be done. Be realistic. Don't expect too much. If you've been investing for years, check your portfolio and think what you can do with what you've set aside.
Get An Adviser If you're late to the game, meet with an adviser ASAP who specializes in retirement planning. Don't panic. Make a plan. Set aside as much money as possible. If you don't develop a plan and stick to it, you'll have to develop a taste for dog food and ketchup in retirement.
Stay the Course If you've been investing for years, review your plan and make needed adjustments. Now may be the time to start moving into less risky investments, such as bonds and maybe some real estate. The closer you come to retirement, the more conservative your investments should become.
Some say you should have at least 70 percent of your income in retirement. Sounds reasonable, if you can live comfortably on 30 percent less. If you can't or simply don't want to cut way back, get busy on rustling up additional money for retirement.
The important thing is that you pay attention to what’s going on with your retirement planning now. Otherwise that dream of retirement may indeed be a fading mirage.
For additional information about saving for retirement at any age, visit these Web sites:
Social Security Administration: http://www.socialsecurity.gov/planners/calculators.htm
AARP:http://www.aarp.org/money/retirement/
Forbes: http://www.forbes.com/2004/09/28/cx_sr_0928retirement.html
May 11, 2008 bonniethesurvivor said:
Easy to say when SS allows coverage of only the most basic essentials, with nothing left over. I fear more than a few of us will indeed be living on ketsup and dogfood in the coming years.
