Am I Saving Enough for Retirement?

December 12, 2018 by Comerica Bank

Are you tossing and turning at night, asking yourself, "Am I saving enough for retirement?" You aren't alone in your sleepless evenings. Many economists are worried that a retirement crisis is on hand as Social Security coverage, average retirement savings rates and the amount of money most households have set aside for post-work living all decline.

This may sound grim, but there is still hope. The first step, especially if you're younger, is to ramp up how much you are devoting to retirement. The Motley Fool® crunched the numbers and found that a person earning $59,000 annually and setting aside 6.2 percent of income could increase what they're sending to their 401(k) by less than a percentage point and end up making more than $60,000 over time

However, what if you're getting closer to retirement and are worried you can't make up for the saving struggles you experienced in the past? Well, it may not be too late to play catch up. Many 401(k) and IRA solutions incorporate options that let you greatly increase what you are putting into the account as you approach retirement age.

There are plenty of options in place when it comes to retirement planning, but the first step is considering how much you need to live on.

How much money will you need to live?

Identifying how much to save for retirement can be complex. Will you spend as much in retirement when you aren't trying to keep up with the same lifestyle demands? Will you be able to leverage existing wealth assets to ease the financial burden of day-to-day living? These kinds of questions play a major role in your calculations. However, you also need to look beyond your personal situation and consider the following:

  • How will inflation rates diminish the value of your existing savings over time?

  • How will the cost of living where you want to retire either help or hurt you in the long run?

  • How will your income change if a spouse passes away or a similar event occurs?

Dealing with these more nuanced questions is critical when calculating how much you need to save, and it is vital to be realistic about your needs. There's a good chance you have a number in your head, and for many, that figure is somewhere near $1 million. You may even think you can get by with a bit less, but both life expectancy rates and costs of living are increasing. In fact, Motley Fool® compared costs in major urban regions, and found that a million dollars might get somebody through a decade of retirement, but that's it.

Setting more aside for retirement

Small changes to how you save and the types of opportunities you leverage can make a huge difference. Here are a few strategies to consider:

  • When you get a raise, immediately set that money into retirement instead of incorporating it into your budget.

  • Use investment management to maximize your returns.

  • Consider freelance work or a part-time job to put more into your savings.

  • Identify precisely how your employer 401(k) matching program works, and make sure you're saving enough from your paycheck to maximize the value you get from the benefit.

Within all of these considerations, it is vital to also connect with the right bank. At Comerica Bank, we offer wealth management services to help customers make detailed plans for retirement. Go from estimates on the income you need to precise figures and plans. Save accordingly by connecting with our advisory teams and taking advantage of the various retirement products and trusts we offer.

 

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice. 

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.

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