I’m noticing a disturbing trend when talking to people about saving for retirement and what their expectations are for their own retirement. Most people have no idea how much income they’ll need when they retire. Even worse, hardly anyone has a specific plan describing how much they need to save NOW to enable them to have enough money when it comes time TO RETIRE.

If you’re under 50, you are in luck…you still have time. If you’re over 50, and haven’t been saving at least 20% of your income, you might be in trouble.

So, unless you have:

• a large trust fund

• are already independently wealthy

• have a big inheritance coming your way soon

• lucky enough to have a large pension

You need to follow this advice, as appropriate to your age:

Over 50, but not retired

Within the next few weeks, write down your ideal plan for retirement. Include everything that could affect your income or spending. For example, will you downsize your home; will you want to spend winters in a warm climate; will you take up a new hobby or activity (golf or travel can be expensive); will you earn money doing part time work; what will groceries, telephone, gas, insurance, cable, etc, etc, cost.

Once you have your list, assign a dollar value (in annual terms using today’s values) to each. Then, add all those amounts up to see what you’ll be spending each year. Next is the step that’s a little complicated: you’ll need to calculate your annual retirement income using projected Social Security benefits, pension benefits, retirement savings you’ll have accumulated and income property you may own. Your spending amount is now subtracted from your income amount and if the result is a negative number you’ll need to spend less or retire later

Under 50

Good news, you still have time to build a decent retirement income. You need to save enough so that your retirement savings are equal to this multiple of your annual income at these ages:

     Age 40, 1.61 x annual income

     Age 45, 3.53 x annual income

     Age 50, 5.82 x annual income

     Age 55, 8.56 x annual income

     Age 65 15.7 x annual income

If you have any questions about how to make sure you’ll be able to retire with enough income, get advice from an Investment Advisor, they aren’t paid commission so they have no incentive to sell you anything.

Jerry Siver