If you're going to base your savings goals on how much you'll spend in retirement, you've got to have a way to gauge your future spending
Foster City, CA (PRWEB) April 14, 2010
How much money do you think you would need if you were 65 and retiring today? Leading financial education Web sites GetRichSlowly.org and MoneyRates.com asked this in an online poll and found that 67 percent of more than 1,800 respondents think $1 million or more in today's terms would be necessary for a comfortable retirement:
- Under $500,000 (9 percent)
- $500,000 to $999,999 (24 percent)
- $1 million to $2 million (41 percent)
- Over $2 million (26 percent)
Commentary from the GetRichSlowly.org reader community and editor J.D. Roth about the polls' results--including analysis of the differences between younger and older demographics--is available at http://www.getrichslowly.org/blog/2010/04/12/retirement-savings-how-much-do-you-need/.
With such little consensus about how much one needs to retire, how should an individual determine how much to save for a retirement beginning years from today?
While most retirement calculators estimate how much you will need by determining a percentage of your income, Roth suggests that a true understanding of your current expenses and a reasonable forecast of future financial obligations are the more realistic ways of developing a picture that will accurately reflect your retirement needs.
"If you're going to base your savings goals on how much you'll spend in retirement, you've got to have a way to gauge your future spending," explains Roth. Important variables to consider include when you plan to retire, how much you anticipate being able to save and invest and what your health might be like. "If you get sick or travel a lot in retirement, for example, your expenses may go up. In general, though, your expenses will likely stay about the same."
According to the Employee Benefit Research Institute, approximately two-thirds of Americans spend about the same or slightly more or less in retirement than during their working years. This means that, for many, pre-retirement expenses are a good predictor of post-retirement expenses.
Richard Barrington, personal finance expert for MoneyRates.com, believes that the $1 million or more threshold chosen by most poll respondents is a realistic goal but cautions that having such a goal is simply the first step in securing retirement. "The disturbing part is the gap between these figures and the retirement balances most people have actually saved so far. Identifying a goal is a first step, but the follow-up is crucial--coming up with a plan for saving that will put you on course to that goal. The earlier in their careers people get started, the less drastic a savings plan they'll find necessary to meet their goals."
Visitors to both GetRichSlowly.org and MoneyRates.com can access educational articles and interest rate reports to help them with setting and achieving their financial goals in any economic situation.
GetRichSlowly.org is an online community devoted to sensible personal finance. Since 2006, GetRichSlowly.org has provided thousands of active readers with a forum to learn about and discuss saving money, eliminating debt, finding the best high yield savings accounts, and pursuing practical paths to accumulating wealth. The site is among "The Top 100 Personal Finance Web sites," according to Liz Weston of MSN, and has been named "The Most Inspiring Money Blog" by CNN's Money magazine.
MoneyRates.com has been a leading source of information on bank rates, personal finance, savings accounts and investing since 1999. The site provides the highest rates on certificates of deposits, money market accounts and high-yield savings accounts.
All writers at GetRichSlowly.org and Richard Barrington of MoneyRates.com are available for interviews on this and other topics relating to personal saving and investing. To request an interview, please contact: