The Boston Globe recently conducted a study showing that more than half of baby boomers are going to have to work past their retirement age. Most baby boomers don’t have enough money saved to be able to retire by their own admission. 30% of people only have enough money to live a year or two past when they retirement. One in seven baby-boomers have no money saved for retirement at all. Another 1/7th of baby boomers have enough money to retire comfortably, but they are in the slim minority. Make sure that your finances are in order so that when your retirement age comes that you have plenty of money to pay for your retirement years.
The first thing you’re going to need to do is figure out how much you and your spouse are going to need to live on when you retire. Your expenses will go down a bit since you don’t have any of the costs associated with work, so you will likely need 70% or 80% of what your existing income is. This means that if you and your spouse make $50,000 a year together, you’ll likely need around $38,000 to make it each year.
This means you will have to have enough money invested so that you can generate the amount of money you need to live on each year. Most financial counselors recommend that you don’t spend more than 8% of your nest-egg each year. The reasoning for this is that the stock market averages 12% each year, which will allow you to take out about 8% each year and leave 4% growth to take care of inflation. For our family that earned $50,000 a year, they would need around $470,000 invested to be able to take care of their retirement needs.
Chances are you and your spouse are going to need to have quite a bit of money invested in order to take care of your monthly expenses on a yearly basis. The best way to take care of this is to start investing early as possible. Individuals who start putting away for their retirement in their twenties and thirties are well on their way to taking care of their retirement years. If you’re in your forties or fifties and haven’t started saving yet, there’s still time to get started. You’ll want to save some more money to catch up to your coworkers who started earlier, but it still can be done.
You can figure out how much you’re going to need to save each month to reach the amount of money you’ll need to have invested when you retire by using one of many savings calculator’s online. BankRate.com has a great savings calculator which will tell you how much money you need to save each month in order to reached your desired amount of money by retirement.
When you do your investing, make sure you do it in the most tax-advantageous way that you can. If you don’t make six-figures, you have what’s called a Roth IRA available to you which will enable you to put away $4000 a year ($5000 starting in 2008) and never have to pay a dime in taxes when you take it out. If you have a 401k plan at work, there’s a pretty good chance it makes sense to participate in it, especially if a match is provided for you.
If you don’t know that much about business or finance, you might be well served to sit down with a fee-only financial advisor to help you get your retirement plans started. Don’t visit a financial councilor that will earn a commission if you buy a financial product of theirs, because they do not have your best interests at heart, only their pocketbooks. This is why you should visit a fee-only financial councilor. You might want to even visit two or three of them to make sure that you aren’t receiving advice that’s way off from any of your financial councilors.