Retirement should be a time to take things easy, and slow down a bit. Without proper planning, however, it’s nothing short of stressful.
According to a recent EBRI survey, nearly one in three workers--an all-time high in the survey’s history--are not confident they’ll have enough money to retire comfortably. But fewer than half the respondents had actually tried to calculate their retirement needs.
You can’t begin to save unless you know how much you’re going to need.
While previous generations relied on traditional pensions, social security benefits, or even inheritances, these sources of income are considered supplemental by today’s retirees.
Related: The Best Places to Retire in 2013
Jean Setzfand, vice president for financial security at AARP, says that rather than lament a long-lost system, think of today’s challenges as an opportunity to customize your retirement. “Whether you want to travel, volunteer, garden in your backyard, or spend time with family, every retirement is different, and it’s really just a matter of defining what you want out of life and then making sure you have the money to support that lifestyle.”
So how much do you need?
See related calculator: How much will I need to save for retirement?
Factor in a long life. According to the Social Security Administration, one out of every four 65-year-olds will live past 90, and one out of ten will live past 95! Fidelity found that survey respondents underestimated their life expectancy by more than 8 years!!!
You don’t want to outlive your retirement savings, but if you come up short, you’ll likely have to work longer, as three in four workers say they plan to, according to a Gallup poll. Some are turning their passions into profits.
“The more that you can think and inventory all the skills that you’ve acquired through your multiple jobs and figure out how to apply them in a more flexible manner, it will provide you a longer perspective,” says Setzfand.
Working longer builds your nest egg, and could boost your eventual retirement payout.
See related calculator: What may my 401(k) be worth?
For example, while your full social security retirement age might be 66, each year you delay your payout, up to age 70, adds 8 percent to your eventual monthly payout (This is a guaranteed return you won’t get anywhere else). That means that a check worth $2000/month at age 66 would grow to $2640 by age 70.
Finally, try cutting your monthly expenses. A little savings can make a big difference down the road. Just eliminating one dinner out per month--and putting that $50 into a conservative savings account--could compound to more than $25,000 over the next 30 years.
See related calculator: What is the impact of increasing my 401(k) contribution?
What are your retirement plans and what are you doing to try to save more and spend less? Find me on Twitter @veragibbons and use the hashtag, #costofliving.