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Share Your Thoughts: Will you have enough for retirement?

April 5th, 2011 at 09:40 am

This is a question I've been afraid to ask myself ever since I've been old enough to contemplate it. Even though we've made great strides toward conquering the debt that we go ourselves into, and have learned to spend less than we make, retirement was the elephant in the room for me. When AS or NT would express their confidence in my financial management skills, part of me would feel a twinge of guilt because I knew I hadn't dealt with one of the most important financial issues of all.

So I plugged our info into a retirement calculator I found on CNN.com. I've used calculators before, and I always come up way short of even my most modest goals. So I was nervous to see what this one said.

I plugged in $80,000 (in 2011 dollars) as our desired retirement income. I would have put less, but keeping in mind MonkeyMama's recent comments about how retirees are often hard-hit by taxes, I went with a sum that would probably cover our current lifestyle minus mortgage and other debt payments, and minus childcare and other baby expenses, but that allowed a fair bit for taxes and/or healthcare.

To my surprise, CCN's calculator said we would need an 8% return on our money and have a 90% chance of getting there with our current retirement funds and rate of contributions.

I posted these results on the SavingAdvice forums because I know the regulars there will always give their unvarnished views about any situation. One said they thought the calculator was right on. The other responder said he thought we needed to be contributing a bit more to get where we wanted to be, but that we could up our contributions gradually and probably get there just fine.

(One reason my results were so different this time: I think maybe I'd done my calculations in the midst of the recession before, and had only calculated a 4% return on investments. But 6% is more likely, and 8% is possible if a bit optimistic.)

This was all mind-blowing to me. I assumed we were so far off target that we'd never be able to retire. Which, based on our families, wouldn't be that bad if our health cooperated. (My dad is more-than-half-time at his computer programming job, and just turned 80. This is his choice, not because of financial need; he just gave each of his 5 kids $13,000 because he wasn't getting very good interest on his savings.) But counting on being able to work in one's 70s and 80s isn't a very good plan, since anything can happen, and your odds of staying fit for work decrease with age.

So I think we do have a ways to go, but it looks like we're heading in the right direction. One of our biggest saving graces is that NT always paid into pensions and retirement funds even when he was young. If AS and I had begun earlier, we'd be even more set. But now that we have a good income and even more earning potential, we'll be able to catch up the rest of the way.

Of course you can never be 100% sure when you still have about 30 years of contributing to do before retirement. But the fact that we're even on the right path is extremely encouraging to me. I feel unbelievably more relaxed; I didn't even know how much of a burden it was until the worry was mostly gone.

So what about you? Have you taken a good hard look at your retirement prospects yet? Do you think you need to make any changes to get where you want to be? Add a comment here or post on your own blog if you've got an interesting answer to share.

6 Responses to “Share Your Thoughts: Will you have enough for retirement?”

  1. LittleMsMom Says:

    I was just thinking about this today. I feel I am on target, but I would love to be ahead of the game.

    My two areas I need to address is paying off my mortgage early and funding my Roth IRA. I did not put money in for 2010.

    It is so hard for me to trust retirement calculators because I never know how much I want as income. I want to enjoy my retirement and take vacations but truthfully how much does that cost?

  2. creditcardfree Says:

    I believe we are on track. I remember punching in a retirement calulator and being shocked at the results, too. And I was also conservative with the numbers.

    We have retirement funds approaching $150K and expect to be putting at least 15% of our gross income away for many more years and those will be years of increased earnings. If my husband stays in the army another 13 years to get 20 years of full time active service, well then we get a stream of income for the remainder of his life that is about half of our income. However, we don't know if he will stay in...thus the high savings rate of contributions.

    And I'm not even counting on social security. If that comes to fruition...well then we are very very set for retirement.

  3. Ima saver Says:

    Since my husband has always been self employed. we will not have any kind of pension or sum of money coming in. I was counting on being able to live on the interest that our savings was earning. A few years back, that might have seem possible with savings account paying 5% or more. Now they are paying almost nothing. I am counting on my husband to work as long as he can and hoping the interest rates go back to something decent. I hope we will also sell our house (3200 sq. ft.) and downsize.

  4. baselle Says:

    Probably; I know I stand a better chance than 90% of my friends, neighbors, and co workers. However, inflation is the big wildcard here. Remember that the rule of 72 holds for inflation also - a 3% inflation rate for 24 years means that 80K will spend like 40K.

  5. ceejay74 Says:

    LittleMs: I'm still working on it, but I felt like as a baseline, I enjoy my lifestyle where it is now. So I removed mortgage, debt and other payments I figured would be gone, but left a healthy amount (about 35% I think, but it was just a rough estimate) for property and income taxes. I don't think I'll need much for healthcare since I'll be in the UK, which has universal coverage. You are military, correct? So you shouldn't need to worry about healthcare either.

    CCF: I didn't include Social Security either. I don't know if it'll be around, and I don't know how much I'll get if I move to UK in 5 years. (I assume the UK, having a socialist government, will provide some sort of equivalent, but I haven't looked into it & wouldn't want to count on that either.)

    Ima: Are you planning to start drawing on the savings themselves when he retires, or is your goal to keep them all and eventually leave an inheritance or charitable gift?

    baselle: I don't quite understand how the calculators work myself; I may have to refresh myself on mathematics and try to come up with my own, to make sure. But supposedly they did adjust for inflation; they were saying I'd be withdrawing $205K or something per year at retirement, because that would be the equivalent of $80K when I retired.

  6. frugaltexan75 Says:

    At 35 I have roughly $25k in retirement funds. Unless I get a w2 job soon, I don't know when I'll be able to start contributing again. So needless to say, I do not feel at all good about retirement prospects.

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