Estimating how much you need to save for retirement can be a simple calculation for many people. How much do you need to live on each year? How many years do you expect to live past your retirement?
Multiply the two and, there you go, a simple way to find your base retirement savings requirement.
Accounting for inflation, and determining if your monthly contributions, the rate of returns and the number of working years you have left, will actually get you to your goal -- that’s when the math gets trickier.
Retirement calculators can do some of that work for you (I’ll link to my favorite in the bottom of the post). But even if the calculations come out and everything looks good on paper - a simple retirement calculator can’t really predict the future.
Factors that Go Into Knowing if You Are Saving Enough for Retirement
Return on Investment
How long will you live
Future cost of living
Pension, Retirement Benefits, Social Security
Current net worth
Working years left
Monthly savings allocations
There’s not a whole lot on that list that is firmly within your control. And that’s ok.
The goal of mindful financial planning is to step into a place where you don’t spend energy on the unknowable. Instead, we make our best guess about the future. We act accordingly and stay open to adapting the plan to reflect the reality of life.
What You Can Do
STEP 1: Identify Your Goals
I teach a reverse form of budgeting that moves number crunching to the end of the process. Goals and values are always first. When you know where you want to end up, the path becomes clear. When you have a strong and motivating why, hurdles become worth the effort.
STEP 2: Build a Plan that Works for You
Daily lattes are everyone’s favorite punching bag when it comes to cutting expenses and building a plan. For some people that’s their chosen luxury. I’m not going to ask you to give it up if that’s part of your daily plan. Building a financial plan that moves with you (and includes lattes, if that’s your thing) is a better plan than one that’s rigid and unsustainable.
STEP 3: Keep Track
Two factors make tracking your progress essential. First, things are going to change. They just are. Markets will go down. Second, bad things will happen. If you’re not tracking, you won’t be able to adjust and you will miss opportunities to really maximize your efforts.
But if you really want to up your game, I invite you to join me over on Right Capital. It’s the tool I use for all my financial planning clients. And I’m offering it to you for free.
Within a few minutes, you’ll have a much wider view of your current financial situation and if you are saving enough for retirement.
If you get into it and have questions - give me a call. I’ll walk you through it. Really. I will.
Or if it’s after business hours - just schedule a call.
Every financial situation is different. If you want to truly start determining how much money you need for retirement - check out this great resource: Right Capital.