Up The Retirement Wallet????

[LuxLiving]

Does this news make you want to increase your retirement investments?
Will you actually make an increase?

"According to the 2005 Retirement Confidence Survey® conducted by the Employee Benefit Research Institute® and Mathew Greenwald & Associates, a majority of workers expect that they’ll need 70% or less of their annual working salary once they retire. And just one in 10 workers think they’ll need at least 95% of their preretirement income.

However, more than half of those surveyed who are already retired say that they need 95% or more." ~American Funds newsletter

[pearlieq]

Re: Up The Retirement Wallet????

I'm already planning on replacing 100% of my income. I don't really want to decrease my standard of living, plus I'm sure we'll be spending more on hobbies, travel, etc. We likely won't have a housing payment, but that should be offset (and then some) by increasing health care costs.

[sweeps]

Re: Up The Retirement Wallet????

Playing a slight devil's advocate role here... A slice of your income while you're working goes toward funding retirement, right? Let's say 20%. Then when you retire, you really only need to replace 80% of your income to maintain the same standard of living. Correct?

[Ima saver]

Re: Up The Retirement Wallet????

I am sure I will need 100%!!

[pearlieq]

Re: Up The Retirement Wallet????

Playing a slight devil's advocate role here... A slice of your income while you're working goes toward funding retirement, right? Let's say 20%. Then when you retire, you really only need to replace 80% of your income to maintain the same standard of living. Correct?

That's a good point. I was thinking more about net income (from which our retirement savings is already removed) than gross.

I'm still so worried about health care costs that I'm aiming as high as I can.

[sweeps]

Re: Up The Retirement Wallet????

Yeah, I knew what you meant. But I think this is a flaw with some of these retirement studies (like the one in the original post). It specifically refers to "salary" which I interpret to be gross income -- before retirement savings and before taxes. Once you retire, the retirement savings goes away and income taxes theoretically go down because you don't need to withdraw money to fund retirement savings.

But regardless, I agree wholeheartedly, it's better to shoot on the high side because of spiraling health care costs, federal deficit concerns, the desire to travel and live it up instead of sitting around knitting and watching TV, etc.

[disneysteve]

Re: Up The Retirement Wallet????

Playing a slight devil's advocate role here... A slice of your income while you're working goes toward funding retirement, right? Let's say 20%. Then when you retire, you really only need to replace 80% of your income to maintain the same standard of living. Correct?

You are basically correct. However, not many people in this country are saving 20% of income for retirement. Heck, the national savings rate last year was a negative number. The vast majority of Americans are spending as much or more than they are earning. So a reminder to save more is never a bad idea.

Of course, you also need to consider rising costs, things like property taxes, for example. And, of course, there is the huge unknown of healthcare costs.

There is no such thing as having too much money to retire... only not enough.

[disneysteve]

Re: Up The Retirement Wallet????

To answer the original question if this changes my plans, the answer is no. I'm already saving to replace 100% of income.

[LuxLiving]

Re: Up The Retirement Wallet????

Let us not forget to compensate for that Dratted INFLATION!!

[sweeps]

Re: Up The Retirement Wallet????

Inflation is definitely a concern. But the assumption is your nest egg is in investments that can keep up with inflation (i.e. not stuffed in a mattress).

[TBH]

Re: Up The Retirement Wallet????

I am so far from retirement (35 long years away) that it's hard for me to know what my income needs will be in retirement. I'm still in the mode of saving as much as I can, and trying to increase the amount I'm saving. So no, this study doesn't change anything for me.

Speaking of increasing my saving, my annual raise will come through in a few weeks so I upped my 403b contributions from 10% to 11%. It's only one point, but my employer also just upped their contribution from 4% to 7%! Woohoo!

[WellManicuredMan]

Re: Up The Retirement Wallet????

Speaking of increasing my saving, my annual raise will come through in a few weeks so I upped my 403b contributions from 10% to 11%. It's only one point, but my employer also just upped their contribution from 4% to 7%! Woohoo!

Wow, 7% match is really good. I only get a measly 2%.

[cschin4]

Re: Up The Retirement Wallet????

I really don't see where I can save and invest enough to replace 100% of my income x 20+yrs. Nice if you can, but I think we find in the end that all the "projected gains" are overinflated and most people will have much less to live on in their golden years than they think they will. We were sold a bill of goods in the form of 401K's, etc so employers no longer had to be responsible for pension plans. And, to sell us on it, they had to show us how we would all be millionaires by the time we retired. Just my opinion.
I am doing all I can to save including IRA's, etc. So, frankly, since I am doing all I can, I just try not to worry too much about it.

[Jacklad]

Re: Up The Retirement Wallet????

However, more than half of those surveyed who are already retired say that they need 95% or more." ~American Funds newsletter

Doesn't surprise me - I know a couple who has dealt with money over their working lives through liberal use of HELOCs, credit cards and a "spend, spend, spend" attitude, including several instances of "trading up" to bigger and more expensive homes. They are looking at retiring with years left on their mortgage, tons of debt, and a reduced income.

On the other hand, my husband and I will both have pensions that will replace about 70% of our current income. They are both indexed and include continued benefits.

Even if the pensions were our only source of income, we'd be OK. Our house will be paid off in four years and our other debt in two - so, no mortgage, no debts, no feeding six adults (boy, will we cut our grocery budget). We'll go down to one vehicle (only have two now because we both work and require transportation). We'd have plenty left over.

Of course, we do have additional retirement savings, an income producing property and other sources of income, so we'll be doing very nicely indeed.

Jackie

[Ima saver]

Re: Up The Retirement Wallet????

We build houses, and it is always amazing to me to see people in their 70's buying new houses and then gettting mortgages. Their homes should be paid for by the time they retire.