3Q2018  |  All Ages

The #1 Retirement Question

For the past 10 years I’ve had the pleasure of speaking with thousands of employees nationwide who are part of their employer’s 401(k) retirement plan.  I’ve talked to employees from all industries –  medical, manufacturing, tech, service, construction and the list goes on.  No matter who I talk to or where they are from, I tend to get asked one common question:

“How much money should I save for retirement?”

The general rule of thumb given by many financial advisors or planners is to save about 10-15% of your pre-retirement income over a 30- to 40-year period.  The thought is in 30 to 40 years, you would have saved enough money to replace anywhere from 70% to 85% of your pre-retirement income while you’re in retirement.  For example, if you earn $1,000 per month today you should save $150 per month for retirement which can include employer contributions as well.  Then during retirement, you should be able to withdraw about $700 to $850 as monthly income for retirement.  This calculation also assumes you will receive about 40% or $400 per month from Social Security, which is the average income based on average earnings stated by Social Security Administration1.

This can be a good guideline for retirement saving, but the reality is that not everyone I meet can save 10% or not everyone has 30 years before they retire.  No matter what age group or demographic I speak to, the real answer to the question above is: we should all save as much as we can!

This could mean 5% for some or it can mean more than 15% for others.  We all have different financial situations with different financial priorities, and this number could vary.  To find out what your number should specifically be, there are several online calculators you can utilize.  They allow you to take all your accounts into consideration with current account balances and assist you to determine what dollar amount you should save for retirement.  Many of the retirement providers will hypothetically show you that by saving “X” dollar amount today, you will be able to replace “X” percent of your current income in retirement.  If you’re looking for a more customized ongoing analysis, feel free to work with a financial professional who can help with all areas of your financial picture.

Through my experience, this is not only the most common question I get asked but, in my opinion, the #1 retirement question employees should ask themselves.  Employees who regularly ask themselves this very question are the ones who try to save as much as they can, not just today but in years to come.  They are also the ones who tend to have higher account balances.  Are you saving as much as you can?

Marco Melero, C(k)P®, AIF®

Marco Melero, C(k)P®, AIF®

Multicultural Education Strategist/Retirement Plan Consultant

1. https://www.ssa.gov/planners/retire/r&m6.html Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a Registered Investment Adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Qualified Plan Advisors (“QPA”).

This commentary is provided for information purposes only and does not pertain to any security product or service and is not an offer or solicitation of an offer to buy or sell any product or service.

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