Are you on track for retirement?
No matter your age, saving and planning for retirement is necessary. The sooner you begin putting money aside, the more prepared you will be when the time comes for this next chapter of your life. But how much is enough to ensure you will be financially secure? What is the optimal rate to set aside each paycheck? What if you started planning too late? Although it varies from situation to situation, here are some tips to consider:
Consider Your Personal Situation
Everyone has their own, unique situation. At the end of the day, your cash flow needs to be able to pay the bills first and foremost. However, you cannot neglect saving for your future. With the lack of funding in our Social Security system and the lack of pension income in the corporate marketplace today, it is your responsibility to save and build for your future. There is no set amount needed to retire. You need to consider if you intend on maintaining your current lifestyle throughout retirement and how much is needed to do so.
Our Rule of Thumb
As a rule of thumb, it is encouraged to save at least 10% of your income throughout your career to appropriately account for what your target would be in retirement.
Studies show that a reasonable growth rate is approximately 5% to 7%. Additionally, you can anticipate reasonable wage increases over the average 35+ year career. With both these factors in mind, by saving 10% at all times, no matter if you're at an entry level or an executive level, you should have your asset base in line with where it needs to be to support your lifestyle during retirement.
Playing Catch Up
Many people neglect saving for retirement as a result of lack of focus on the long-term, debt, marriage, children, or buying a home. If you are finding that you did not save in your 20s, or perhaps early 30s, you need to consider what you need to do to catch up. We would suggest running a financial model via a financial planning tool to gauge where you are today, when you would like to retire, how much you think you can save. your employer match, and a reasonable rate of return and project that out into the future. Then consider, based upon distribution factors of 3.5% to 4%, how much income that lump sum will get you. This will enable you to have an understanding if you are on track. This sounds complicated, but any Certified Financial Planner can assist with this.
Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
Ben Soccodato is a registered representative of and offer securities, investment advisory services through MML Investors Services, LLC. Member SIPC. www.SIPC.org 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000