Saving Enough for Retirement?

I've worked in the employee benefits area for more than fifteen years. There is nothing more heartbreaking to watch as older employees realize that they have not saved enough money to last through their retirement years. These employees, once they understand they don't have enough saved, often make the decision to delay their retirement and keep working.

Retirement and financial advisors suggest the same concept: start saving for retirement at a young age. Through the miracle of compounding interest, a young person will see their relatively small investment grow exponentially through the years.

For example, if a 25 year old saves $1,000 and draws 5% interest, by the end of that year his balance will be $1050. If he leaves that money in his account for another 40 years (at age 65), he will have over $7000 saved. However, if a 40 year old saves $1000 and draws 5% interest, by the time he is 65 years old, his total amount is only about $3400.

It's a good idea to save for retirement when you're young, even if you're saving even modest amounts. If you divert that money to a qualified retirement plan (like a 401(k)), money is taken out pre-tax.

Today's retirement planners suggest a "three-legged stool concept" for workers. Leg 1: 15%-25% of retirement income should come from Social Security. Leg 2: 0%-60% from an employer-sponsored retirement plan or pension plan. Leg 3: Any difference between the two should be filled by private savings.

Today's younger workers can be skeptical that they will receive all of their Social Security benefits, so their reliance on qualified pans and personal savings is magnified. Many planners suggest that people deduct regular amounts from their paychecks, to automatically deposit into a retirement savings account. The younger worker may not have a huge amount to invest, but even $10 or $20 a paycheck can increase dramatically over time.

There are numerous on-line retirement calculators available for free. Access your company's investment website, or just Google "retirement calculator". You will be asked to input basic financially information, such as your current salary, what you've saved so far, and your age. You can adjust the numbers to calculate your total desired retirement savings.

If you've delayed saving for retirement, don't despair. Saving today can never hurt your portfolio, no matter how old you are. Make saving for retirement a priority, so that when you're about to enter your golden years, you won't have to work at the Golden Arches.