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January 29, 2015
Financial experts in the retirement planning community have traditionally recommended that you save about 10 cents out of every dollar earned and put it toward your retirement, and Clark Howard agrees with that assessment. That leaves a lot of questions unanswered, and it might even create a shortfall in your future retirement income if you don’t start saving early enough.
Ten cents out of a dollar from the time you’re 20 years old results in a lot more than the same portion saved beginning at 30, 40, or later. The older you are when you start, the more you’ll need to save. Conversely, the younger you start saving, the more likely 10 cents will help you fund a comfortable retirement.
In a recent show, Howard commented on other financial advisors’ idea that 10 cents just isn’t enough anymore. Their new suggested standard might actually be 15 cents, but he thinks nobody should panic. There’s no reason to worry about all of those years you’ve saved only 10 cents, and you don’t need to rush and change your contributions right away.
The reason why the traditional bar is in question is mainly because, according to Howard, fewer employees will retire with a pension. Where an employer-provided pension plan was once fairly common, pensions are falling away. Some existing pension plans are also at risk since Congress agreed to allow significant cuts.
The bottom line is that no one can tell you how much you need to save for retirement without assessing hundreds of details of your financial profile (now, and what you might expect in the future).
It is easy to do your own assessment. To find out exactly how much you need, use a comprehensive retirement planner that lets you create a highly personalized and detailed plan. The NewRetirement retirement calculator is an easy to use tool that puts you in the driver’s seat for all of the inputs.
Forbes Magazine calls it a “new approach to retirement planning.”
You input your information and the system performs hundreds of different calculations and provides charts to help you understand your financial situation. Don’t like your results? The calculator lets you add more information, change your assumptions, and keep playing with your data until you find a financial plan that will work for you.
The bottom line is that you are the one who is ultimately responsible for funding your retirement. As Howard explained, when you look in the mirror, that’s your go-to guy.
Social Security might help, but there is no guarantee of what your benefit might be once you’re old enough to apply. And if you retire at 62 but want your full benefit, you’ll have to wait to collect.
You’ve got choices for saving, investing, and using what you’ve got to its best advantage. You could tuck it all away in a safe but low-interest account, or you could make your money work for you by using an array of options for a well-balanced plan. That’s when your savings will really grow.
If you’re comfortable saving 10 cents out of a dollar, and if you’re saving consistently, Howard believes you’re probably doing just fine. He does caution, however, that this 15-cent warning should be taken as a sign.
The real problem is that most people don’t save the whole 10 cents, it’s closer to 4 cents, and those are the ones who should rethink their strategy. Saving a little is better than nothing. But since you’re already in control, take the advice of one of America’s respected financial experts and start saving more now, to have a much better life later.
NewRetirement can help you sort out whether you’re saving enough, and what to do if you’re not. Try our retirement calculator today, and you’ll be well on your way to a more educated and in-charge retirement strategy.
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