Running the numbers on retirement

Do you know how much you money you need to retire? Many people don’t.

Well, this week, you’re going to find out. I know it sounds like a daunting proposition, and you may be worried that you’re going to learn you don’t have enough.

Do you know how much money you'll need to retire?But think about it like this: Isn’t it better to learn you’re going to fall short now, when you have time to make some changes in order to improve your situation rather than down the road when you don’t?

The unfortunate reality is that the vast majority of people aren’t saving nearly enough. A recent study by Hewitt Associates projected that fewer than one in five—one in five!—workers are saving enough to meet all of their retirement needs.

There are a few factors working against us. The first is that we’re living longer, so we need more money at our fingertips than ever before. The second is that we’re living healthier. Financial advisors used to have people strive to replace 75 to 80 percent of their income in retirement—now that’s not nearly enough. The Hewitt study suggests that men need to replace 123 percent of their final salaries, and women need to reach 130 percent.

Why is it more for women? Because not only do we live an average of seven years longer than men, we’re paid less during our careers and we take leaves from the workforce to care for kids and aging parents. As a result, we don’t amass as much in our retirement plans, in general. But enough with generalities. I want you to figure out where you are specifically.

So, first we need to get a grip on your life expectancy. Many retirement calculators—including the Wells Fargo one I’m going to send you to—default to age 85. If you have parents or grandparents who are living long into their 80s, even 90s, I’d advise you to take that up by 5 or 10 years. (It’s very easy to make the change, you just type new numbers in.) Or, you can take a few minutes to figure it out by running a life expectancy calculator, which is kind of fun and makes you realize how important it is to wear seatbelts and not smoke. This one was developed at The Wharton School of Business.

Next, go to your files (or online) and pull:

  1. Your most recent estimate of Social Security Benefits
  2. Your most recent retirement plan statements: IRA, 401(k), etc.
  3. Any pension plan statements

Finally, go to the Retirement Quick View tool developed by Wells Fargo. It will give you a guide to where you are today and how to get where you want to be tomorrow.

Have you figured out how much money you need to retire?

Jean Chatzky

About Jean Chatzky

Jean Chatzky, the financial editor for NBC’s TODAY show, is an award-winning personal finance journalist, AARP’s personal finance ambassador, and a contributing editor for Fortune magazine. Jean is a best-selling author; her eighth and most recent book is Money Rules: The Simple Path to Lifelong Security. She believes knowing how to manage our money is one of the most important life skills for people at every age and has made it her mission to help simplify money matters, increasing financial literacy both now and for the future. In April 2013 Jean launched Jean Chatzky's Money School , a series of college-style, interactive online personal finance courses that give men and women across the country the opportunity to learn from and interact directly with her. Jean lives with her family in Westchester County, New York.
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2 Responses to Running the numbers on retirement

  1. Anonymous says:

    interesting!

  2. Treina says:

    I had No idea of how much I needed for my retirement. I am a brand spanking new customer, and my Personal Banker made it so easy to get on line and learn the services offered………….But This Blogg was very important to me. Thank you, and I want to know MORE. (I’m very greedy for knowledge)

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