How much money do you need to save for retirement?
The 2007 Retirement Confidence Survey by the Employee Benefit Research Institute and Matthew Greenwald & Associates reported yesterday that nearly half of workers surveyed have only $25,000 – or less – saved up for retirement. (You can find the survey results at www.ebri.org, or click here. CNNfn also has an article on the survey. Click here for that article.) The survey also found that workers have been slow to adapt to changes in the retirement system, many are ignorant as to Social Security basics, and that more than 10% of workers wouldn’t follow financial advice if it was given them. 66% of workers surveyed would follow only some financial advice.
But much money do you need to save for retirement? Where do you find the figure that you can plug into your monthly budget and then divide by the number of years left to retirement?
Unfortunately, because everyone is different, especially when figuring in such factors as health and personal spending habits, it is difficult to say definitively “Person X must save Y dollars in order to retire in year Z.”
The figure that Fidelity suggests is 80%. For a secure retirement a person should save enough to replace 80% of their pre-retirement income. The average working family has saved only 58%. A survey done by Fidelity in March 2007 found that “working Americans have a median of $22,500 in total household retirement savings and anticipate receiving $29,500 in annual Social Security payments. In addition, 51 percent of households expect to receive a pension and anticipate median benefits of $18,000 annually. Baby boomers had the highest level of readiness, with an income replacement level of 62 percent, up 2 points over 2006, and a median of $45,000 in total household retirement savings.” (Click here for the March 13 Boston Globe article about the survey.)
For more information on how to prepare for retirement, you can go to Fidelity’s website and click on Retirement and Guidance. The website choosetosave.org also has information about how much to save for retirement, as well as interactive calculators to give you a ballpark figure.