Sachetta, LLC
Planning for retirement involves a lot more guessing than some people may be comfortable with. While you can make careful plans and calculate financial targets, some of the factors that determine how much you’ll have saved by the day you retire are outside your control. The bad news is that making sure you’re on a track for a comfortable retirement isn’t as simple as hitting a certain target in your bank account. The good news is that frequently reassessing your retirement savings may help you find new opportunities to grow your money.
Reassess Retirement Savings Needs
To make sure you’re on track with retirement savings, start by looking at your vision for retirement. Your retirement timeline will determine how much longer you’ll have to save, and how much you can expect to need. So before getting into numbers, it may be useful to sit down and firm up your thinking around when you realistically expect to retire.
At the same time, give some thought to what you want your retirement to look like. Someone in their 30s might not be able to answer that question yet, but if you’re closer to retirement, you may have more concrete plans in mind. Even if you’ve already done extensive retirement planning in the past, your hopes and needs may have changed in the resulting years. So it’s useful to check in with yourself about your current expectations.
For example, do you plan to stay in your current house, or will you want to move to a new community with a different cost of living? Do you have any expensive bucket-list plans in mind that will affect how much you need to save? Have any developing health conditions changed your vision for retirement? Do you expect that you’ll have to provide financial help to struggling family members while retired?
Run the Numbers
What can be tough about assessing your retirement savings is that there are tons of different calculations, models and “rules of thumb” that savers can use to check their progress. None can tell you definitively about how prepared you are for retirement, but they could help you assess whether you need to start saving more.
A few of the quick tricks that some savers use include:
• The 15 percent rule. This is a simple strategy that some savers use to identify a yearly savings goal. The idea is to put aside 15 percent of your pre-tax income each year for retirement. If you’re just starting out, this might be a good savings target to shoot for; if you’re getting close to retirement, however, this rule won’t be as helpful.
• The age method. This is another fast way to assess whether you’re saving enough, depending on your age. Generally speaking, the idea is that a 30-year-old should have at least one year’s salary saved, a 40-year-old should have saved three times their salary and a 50-year-old should have five to six times their salary. By 60, the goal is to have seven to eight times your annual salary saved for retirement. It’s not a perfect method by any means, but this is one metric that’s easy to measure.
• Retirement calculators. Your bank’s website might include one of these tools, which ask for data including your age, current income and current savings. The calculator should then project how much you’ll have accumulated by the time you retire. Some calculators work a little differently, by using data about your age, location and income sources to project how much money you’ll need in retirement.
There’s merit in all these tools, but unfortunately none of them can give you a really accurate idea of where you stand. There are just too many factors around your retirement savings that have to be taken into account.
Talk to Your Advisor
Your specific financial picture is unique, and no online calculator or quick rule of thumb will account for everything that comprises your retirement plans. How aggressive or cautious is your investment strategy? What sources of income do you have in addition to your salary? How will your family’s needs in the coming years affect your finances?
The best way to get an accurate full picture of your current retirement savings is to talk to your financial advisor. They can look at all the relevant data and make nuanced projections that let you see how your retirement savings might change in coming years. This meeting is also an opportunity for your advisor to make recommendations for tweaks to your current strategy that will maximize your retirement savings.The advisors at Sachetta Callahan take a holistic, 360-degree view of our clients’ financial lives. We want to help you clarify your retirement goals and position yourself to afford them. Whatever your vision is for your perfect retirement, we want to help you get there. Contact Sachetta Callahan for more.