Saving for Retirement for everyone
Saving for retirement is a challenge, isn’t it? Or is it? When you are in your 20s, having fun, going to school and partying, are probably top-of-mind on the list in terms of lifestyle. Retirement is far off the list at this point. Lots of time, right? Then in your 30s, maybe family comes along. Well now… we can’t save for retirement because hey, we have a mortgage to pay and kids to feed. Unfortunately, many of us don’t think about it till we get older and realize that we are going to need money when we aren’t working. And believe me, you would be better off having the choice of whether you want to work or not in your retirement years.
That brings us to how much you should save. Well, I guess you have to figure out how long you going to live(?). Tough question because we don’t really know. With improved medical technology and medicine, the average human is living years longer compared to years before. Life expectancies in most Western nations is till the age of 90. London Life coined the expression “Freedom 55” , but most of us still have the traditional age and mindset of 65 for the year of retirement… or at least somewhere between 65 and 70. Getting back on track here… sure, we should save as much as we can. It goes back to how much should we save? I guess that depends on the lifestyle you want to have. You have to consider inflation in your factoring as well, because history has shown that things are going to be expensive in the future, whenever those golden years start. You also have to determine how much you will need to maintain a lifestyle you expect to have each year of your elderly life. Who knows how much those medical care and old age home costs are going to be?
Here are some commercial retirement tools:
CNN Money has an interesting Retirement calculator that factors in your current age with the age you wish to retire, the funds you have currently saved, a scale with your current income (assuming you will make the same salary throughout your life) and percentage scale for how much you plan to save for your retirement. The link is here. So let’s see… if you were to live till you were 100 and you “needed” (wanted) $40,000 a year on average to live on (use any currency you want by the way it all works the same), you would need $1.4 million. So how are we doing so far? Let’s say you started retirement planning at 40 and saved 10% of your income. Your salary would dictate how much you would have by the time you reach your golden years. For the sake of argument, we will put your salary at $40K. Would that be enough? Not if you are 65! (try it… there is a big shortfall). So ok, let’s make it 70 as the target for retiring. That’s better, but you would still be pretty short.
Well, hopefully that inheritance will come in. Or you know, maybe win the lottery. You might be a good card player at the casinos. Facetious is the word that is being described here. Hoping is not a financial strategy. Bottom line? Save as much as you can as often as you can. 10% is a standard target. Make that your threshold. You can save on income tax (depending on the country you are from) by putting money away in a registered plan. Sure old age benefits will help but relying on that is not a whole lot better than relying on winning the lottery. Save. Save. Save.
Investopedia.com has some great articles –> click here. (Most of it is for US residents but can be applied to other country retirement plans. Here’s a good calculator for retirement too: Retirement Calculator
Dynamic has a great retirement calculator for Canadians–> click here.