Do you have enough saved for retirement? It should be no surprise than too many Americans have not put enough aside for retirement. So much has been written about baby boomers and retirement, but I recently read a Los Angeles Times article how it is not limited to them. 10,000 baby boomers turn 65 years old every day and will for the next nineteen years! Will you have enough savings for retirement?
Pew Charitable Trust says Generation X (38-47 year olds.) lost almost half their wealth in the great recession between 2007 and 2010. Young baby boomers (48-57 year olds) lost nearly 28% of their wealth. It seems that that it is entirely generational, if you have enough savings for retirement. Late baby boomers (58-67 year olds) lost 25% of their wealth. Generation Xers and baby boomers are approaching retirement with more debt than ever before
If you do not defer retirement, you will face a lower standard of living in retirement. As a rule of thumb, you want 70-75% of your pre-retirement earnings. Some may argue the arbitrary percentage up or down, but it is just a rule of thumb. It is up to you how you want to retire. Personally, I want to do more things in retirement and my target is 100+%. Do you have enough savings to retire? If not, what do you do? One solution is to put off retirement.
If you are too young to retire and too old to get a job, what can you do? Your only choice is to cut expenses! You can downsize, refinance your mortgage, sell your home, move in with family, roommates, or a reverse mortgage. What other expenses can you reduce or eliminate? You can move to a less expensive area of the country or even move to a foreign country with a lower standard of living. Before I would consider moving to a foreign country, I would reduce my standard of living in my present location. All difficult decisions, but necessary if you have to retire.
Additional income is another choice. Part time work, side business or selling assets are all ways to generate additional income. Which one works for you? As a former consultant and entrepreneur, I can generate some income on a part time basis. As a retired teacher, I can be a substitute teacher. Everyone has different skills and experience which you can turn into extra income. If I downsized more, I could sell antiques, furniture and other collectibles.
When you eat too much and start to gain weight, you realize you need to do something. You can just buy larger clothes or lose weight. Typically, you try to lose weight by figuring out what you are doing wrong. One way is to write down what you eat every day which makes you aware of the cause of the weight gain. Starting a diary of what you spend every day will show you what you are spending your money. It is the first step to make changes.
Making changes and taking control of your spending are important parts of retirement. Especially, if you do not have enough savings to support the retirement you would like to have. The next step is to have a budget! Remember, a budget is a structure to help you reach your financial goals. In this case , your financial goal is a reasonable retirement. It helps you confront your expenses and makes you do something. Don’t avoid this step because you need to control your spending.
If you can postpone retirement so you will have enough savings is the best choice. Your investments need time to grow. The stock market is reaching new highs and restoring some of the money lost in the recession. Don’t get caught up in the bull market without taking steps to ensure your future. If you are eligible for Social Security, delaying retirement means a better retirement. Take steps to pay down debt, refinance or eliminate debt. Planning your future is not just limited to when you are young, it is a continuing process.
The best choice is always to retire when you have enough savings to live the way you want to. Sometimes you do not have a choice and you have to work with the situation you have versus the one you would like. You can look for more income or reduce expenses and realistically, you have to do both. You don’t stop budgeting when you retire because life is choices. You cannot make up for years of not saving enough, but you can make the difficult choices to live within your means. How is your retirement savings?
Photo by: Jun’s World
Buck Inspire says
Solid advice as usual KC! I’m maxing my 401k and Roth IRA’s. I started a 529 college savings account for Baby Buck. Thanks for the reminder about cutting expenses, generating side income, and postponing retirement if necessary. You are right, we always have choices.
When you are in your twenties, you think you have more time. The reality is you won’t have enough savings and your standard of living will decrease unless yo do something.
Jenny @ Frugal Guru Guide says
75% of our pre-retirement income would be awesome because we won’t have a mortgage, retirement savings (ha!), or college savings, which together take 45% of our income currently.
Recognize that your retirement will last 30 or more years and your expenses will increase over time.
We definitely don’t yet…..but we’re only 33. We’re working on it. Hopefully saving/investing a large percentage of our income over time will be enough by the time we are a little older.
The word hopefully scares me. 🙂 Make a plan and make sure you are on track to reach it.
Daisy @ Prairie Eco Thrifter says
I definitely don’t have even close to what I would need for even half a year of retirement, but I’m in my mid twenties and I too am working on it. I have a pension with work but I also save in two different accounts.
Of course, but are you on track based on projections?
My Financial Independence Journey says
My retirement savings are probably a bit behind for my age (thank you excessive schooling), but I’m working hard to catch up via aggressive savings and investing.
It is something to monitor and determine if you are on track to your goal.
John S @ Frugal Rules says
Great insight KC! We don’t have what we need yet, but then again we’re still in our 30’s. We took a hit like everyone else but have come back strong because I took advantage of getting into some solid stocks at really good prices. That said, I think it comes down to thinking strategically and prioritizing your budget so you can maximize what you’re throwing at retirement.
I agree, think strategically is very important. Having a plan and monitoring your progress is no different than any other goal.
Hard to balance with other savings funds, such as college for children. What’s your take on establishing this fine line?
Given a choice, I would defer to retirement savings. Your children have choices too, they can go to community college for the first 2 years. If you lose out on 5-10 years of retirement savings you may need them to support you.
Matt from Saverocity says
How much did generation X and the baby boomers wealth increase since 2010, with the market at an all time high and all that…?
Unfortunately the article did not cover it. If they did not panic and sell, their portfolio came back better than it was. Of course, that depends on their individual asset allocation.
pramod babiskar says
Start early before marriage can make awesome chunk till retirement.pension funds also a good options for others.
This is always true! Time is the one element that will compensate for smaller contributions, investment mistakes, stock market volatility etc.
Kathleen, Frugal Portland says
Great points — I think building a business that will supplement my retirement savings will be key for me, because I’m way off projections and a piddly $5500 a year won’t help much.
I strongly believe in multiple income streams mainly because things happen! Besides, I enjoy being busy and a little extra income is nice.
I don’t have much of a retirement account, save for mandatory contribution to the French and UK pensions while I was working there. I treat retirement as savings and try to grow wealth while already living off investments, so that dividends grow with inflation and the increase in my needs.
There is nothing wrong with that as long as it is working for you. I did that through starting businesses.
Andy Hough says
My retirement savings are way below where they need to be. I do plan to add to them aggressively for the next few years. Since I’m pretty frugal, I don’t think I’ll need as much retirement savings as most financial experts suggest.
How are you doing compared to your goal or plan? If you are achieving the goals you set, there is nothing to worry about.
Cat Alford (@BudgetBlonde) says
I’m really new into saving for retirement. I just opened my IRA in January, and I’m going to try to max it out this year. While I wish I could do more, I’m happy that I at least got the process started before my 26th birthday.
That is a great start! You want a variety of retirement accounts eventually.
I’m working my way towards maxing my 401k and my IRA’s. I’ve been hanging out on the early retirement forums such as MMM alot, so I’m aiming to be able to live off 50% of my pay. If the cards playout right I should be able to retire between 45-50 yrs old.
Good for you, but don’t go extreme! I recently wrote an article regarding it and you should not give up everything for early retirement. I achieved financial freedom without depriving myself of everyThing at 38 years old.
I think my retirement is in good shape so far. But I can’t say the same for my parents. It’s unfortunate they were not good with their finances and now have so many money stresses when they should be kicking back.
It is always tough to watch people close to you have a difficult time. Are they going to delay retirement?
The College Investor says
I’m in great shape with my retirement savings as well. I contribute the max every year because I plan on their not being any safety nets when I retire.
I agree that it is better to plan it won’t be there and you won’t need them.
The First Million is the Hardest says
I’m in decent shape with my retirement savings. I’m probably far ahead of the “average American” but I’m still a touch behind where I’d like to be personally.
Your own goals and plans are what is important. The average American is way behind any reasonable level of savings.
Alexis Marlons says
As early as now, even at my twenties, I started saving already for my retirement. Things are really unexpected so now that I am still earning great, I want to set aside for my retirement because I want to enjoy travelling when I get old.
You are right, start early and you won’t have worry about if anything changes.
Good post. Due to the recessions you talked about above, a lot of retired people have started a trend of moving to other countries where the cost of living is low and the lifestyle is great. The only drawback to this idea for many is that they would be far away from their families. But it’s always an option.
Moving is a choice, but should be done after considerable thought. Another country is a big move geographically and culturally.
Darwin's Money says
I’m doing pretty well now. All I need to do is remain employed for the next 25 years or so and I’m sure to hit our goals. The part about remaining employed is more of a risk to me than the discipline to stay on track. I have it all mapped out pretty nicely in excel and know where we need to be for both retirement and kids’ college funds.
Long tern employmment is becoming harder and harder! Almost everyone needs a plan B. You can control your life as long as you are employed! I definitely agree.