Posted on October 27, 2016 in

How to avoid the retirement planning blunder

It could have you tossing and turning at night. Retirement planning leaves a lot of Americans restless. It’s difficult trying to plan for the future while trying to live in the present. Turns out, many people haven’t taken the basic steps to make sure they’ll have enough money to “live on” in their golden years.

According to a recent survey, only 46% of people know how much they’ve saved for retirement. Only 35% have calculated how much money they’ll receive each month in retirement. That means, 65% of those surveyed have no idea what they will have to live on. Another interesting number, 41% of people surveyed are only saving 10% or less of their income for retirement which is below the level of savings that most experts recommend. But, if you’re among those already saving, you’re a step ahead of the rest as many people don’t save anything at all.

If the issue is keeping you from getting a good night’s sleep, there are four important steps to help you feel at ease.

Track your savings: The first step is figuring out how much you’ve saved so far which can then help you decide how much you need to save from this point forward. Of course this might require shifting spending priorities or cutting expenses. This is a good time to list your accounts and their values. Talking with a financial advisor is also a beneficial first step to guide you through the process.

Calculate retirement income: Take a look at interest, dividends and pension payments. Be sure to include social security as well. Then, determine how much of your pre-retirement income this would replace. You may have to shift some assets into income-oriented securities or sell some of your securities.

Determine your savings rate: If you save 10% or less of your income, you may consider increasing that rate. Most research says you need to save about 15% depending on how many years until retirement. Making a budget can help because you can compare “wants and needs” before deciding what to cut, if anything, to accomplish your savings goal.


Save More: Increasing your rate of savings by a single percentage point or two every year can really improve your end result. Our philosophy at CPS Investment Advisors is you need to pay yourself first. For example, you should consider allocating money towards your retirement account before calculating your monthly expenses. No one retired on the money they spent. A gradual increase can make a difference over time. For example, a person making a $50,000 salary who puts $2,000 each year into an IRA with a 7% annual rate of return, could have a nest egg worth around $202,000 after 30 years. A little planning and making minor adjustments can make all the difference.

Source: Investor’s Business Daily