Your Money: December

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Don’t Underestimate Your Retirement Goals

By Karen E. Stawicki

You think you are doing great. Your current per sonal savings rate, as a percentage of gross, pre tax earnings is 15 percent. Good job, but take note: that savings percentage only works in the future if you’re an astute planner today.
    According to the 14th Annual Retirement Confidence Survey released in April, Americans fail to save enough for the future for some primary reasons. The most fundamental reason is the apparent disconnect between future expectations and the current realities necessary to achieve them.
    Because there is a notion that less money is needed in retirement since the kids are gone and the house is paid off, most financial planners will tell you that expenses in retirement will be at least 70 to 80 percent of what they were before retirement. I challenge that statement.
    Let’s begin by defining retirement by today’s standards. It has a vastly different meaning than it did 50 years ago. Statistically, Americans are healthier, wealthier and will live longer than did past gen erations. There fore, the lifestyle expectations of the postcareer  years are increasingly ambitious and potentially expensive. Now, middle-age workers visualize a healthy retirement as having complete discretion with both time and financial resources.
    During peak career and family-rais ing years, most discretionary money is spent only on the weekends or on vaca tions. In retirement, every day looks and feels like a holiday. Explorations of life’s possibilities — postponed due to overrid ing responsibilities — are possible. Doesn’t it make sense that the retire ment lifestyle you look forward to now may actually require your current salary or even more? 
    Therefore, without the use of some creative planning, saving 15 percent gross salary may fall short of your retire ment goals. Of the three variables of retirement calculations — the annual sav ings rate, the average annualized invest ment return of the portfolio and the number of accumulation years — a plan ner has the most direct control over how much to save annually and for how many years to contribute.
Continued...

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