Do you have enough saved for retirement? Here’s how to start figuring

calculatorDo you have enough to retire?

That’s the big question on the minds of many people who are close to retirement. While many websites like this one will help you compare your savings to those of others, the truth is that how much retirement savings you will need is a personal decision and different for everyone.

Financial consultant Wes Moss, in his highly-rated book You Can Retire Sooner Than You Think, gives a simple, five-step plan for helping to ensure you will have a comfortable retirement. He recommends that all retirees have several “core pursuits” in retirement to keep them occupied. These may include hobbies, passionate causes, or part-time work.

By knowing what you plan to do in retirement, you can get a much better idea of what you will need to have in your retirement stash. If you plan to travel the world, clearly you will need to have much more saved than if you plan to stay around the house and tend the garden. So your first step is to decide what your retirement plans are, and estimate how much they will cost. By the way, Moss recommends that everyone have a plan for what they will do in retirement. The happiest retirees, he finds, know what they want to do; unhappy retirees have no idea.

The next step is to figure how much income you will have in retirement, including pensions, Social Security, and savings income. Although it’s tempting for some people to put all of their savings in “safe” investments like CDs, Treasury bonds, and savings accounts, you have to consider whether such vehicles will pay enough returns to last a retirement that may span 20 or 30 years or more. If not, you could consider corporate bonds, dividend-paying stocks, and high-yield bond mutual funds to boost your returns.

If you find your income is less than what you’ll need, you may have to consider scaling back your retirement plans a bit. But your savings may stretch longer than you might think.

Pete Adeney, founder of the popular blog Mr Money Mustache, retired with his wife at age 30 after they’d accumulated $600,000 in savings. His blog shows how they live a comfortable lifestyle in Colorado on less than $27,000 per year. Again, it all depends on what your plans and aspirations are.

He recommends having 25 times your annual expenditures saved up. So if you expect to spend $30,000 per year, you’ll need $750,000 saved up, assuming 4% annual return on your investments. Moss’s book suggests a simple, “four-bucket” system for helping ensure that your savings generate the required 4% annual return. His website also has a retirement calculator to help you answer the big question.


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