April! Can you believe it! We’ve made it through a full quarter of the year. How is everyone’s budget looking?
(Don’t forget, Americans. Tax returns are due this month. Get on it. No one wants to be standing in line at the post office the day the returns are due.)
Earlier this month (so, last week), a friend linked to a post talking about how much people need to save for retirement. Someone my age (35) needs to have at least $1.8 million saved according to this calculation, and people up to 10 years younger need well over $2 million.
Those are some intense numbers. And how in the world are you supposed to figure out how to get there?
I’ve found some pretty good calculators over time, but frequently, they ask for a lot of numbers I just don’t know. They want to know exactly what I will need to spend in retirement. How am I supposed to know that? I know what I spend now, but with inflation, how do I know what that means? In general, I don’t want to retire before my house is paid off, so the plan is to need less money in retirement, but beyond that, who knows?
Enter the Fidelity Retirement Calculator.
(No, they’re not compensating me for this – I just like the calculator.)
It asks some simple questions.
- How old are you?
- How much do you make a year?
- How much have you saved for retirement so far?
- How much do you save for retirement each month?
- How will your standard of living change when you retire (spend more/same/less)?
- Finally, how would you describe your investment style?
That last one’s the hardest one for me to answer, so I took a look at where my money is currently invested through my retirement accounts. They’re probably somewhere between growth and aggressive growth.
The calculator takes those numbers and then gives you a score, estimating what you will have every month in retirement. This does include Social Security, which is a little unnerving, since who knows if it will be there.
The best part? You can then adjust the numbers.
“Well, what if I save an additional $100 a month?”
“How about if I work another year?”
It’s amazing how those little changes make a huge difference. The calculator claims to use estimates based on an underperforming market, which is promising. The hope is that I would have even more available. It also estimates that you will live til 93. Given my family history, it’s not unreasonable to think I’ll be around after that. So time to start saving more.
According to the calculator, I’m on track with my savings, but I’m right on the border. Is it accurate? Ask me in 30+ years. But what it does is give you an estimate of where you are in your retirement planning and where you can make some changes to ensure that you’re in a great place when you do finally retire.
And if you can’t save quite as much as the calculator wants you to? Well, do your best. Put away what you can now. The earlier you start saving, even if it’s only a small amount each month, the more time that money will have to grow while you’re working towards retirement.
How’s your retirement score looking?
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.
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