With all of the day-to-day demands on your finances, sometimes it is difficult to have a strong grasp on what your overall financial picture really looks like. While many people may be very in tune with one segment of their financial life, you may be inadvertently neglecting other parts. One often-overlooked financial aspect is retirement savings. In fact, you may be surprised to know that according to the Motley Fool, 42% of baby boomers cannot answer the question of “How much have you saved for retirement?”. While this revelation may seem shocking, it is a reality that, for many, immediate financial needs tend to take priority and retirement savings get put on the back burner.
One reason for this may be that saving for retirement is complex. Many people know that they have spent their work life contributing to an employer-sponsored plan and/or IRAs, but they may set their monthly and quarterly statements aside, never really looking at how much their account has grown to. Others may have multiple 401(k)s and other plans with previous employers that they have never combined into a rollover IRA, or that they have lost track of. For this reason, it is imperative that those who are approaching retirement start taking control of their retirement savings by working to create a definitive retirement plan.
Retirement planning allows you to dig deep into what you have saved and calculate your total amount of retirement savings. It also allows you to get an educated estimate of what your expenses in retirement may be, as it would be impossible to know if you have saved enough if you don’t know what you will be spending. If you are an organized, motivated person, you may be able to easily calculate this information on your own using an online retirement calculator. If you need more assistance, or have a complicated financial picture that requires in-depth expertise, then working with a personal financial planner may be more appropriate for you.
Once you have an estimate of what you currently have in retirement savings and what your projected spending during retirement may look like, you will be able to determine if you are ahead of the game or far behind when it comes to additional savings required. You may see that the only way to retire on time is to start contributing more to a retirement plan now and cut back on some unnecessary expenditures. You may also find that you will need to stay in the work force longer than you had wanted or anticipated. Whatever your situation is, starting to work on your retirement plan earlier will give you more time to make up the difference that you need.
If you find yourself in the category of someone who responds with “Um..” or “I’m not sure” when asked how much you have saved for retirement, know that you aren’t alone. Many other people are in the same boat. Luckily, you can start taking control over your retirement savings today by beginning the retirement planning process and getting yourself on track to meet your retirement goals.