Right now, I’m listening to the album, Raising Sand, by Robert Plant and Alison Krauss, released last year. Robert Plant will be 60 years old in August. I imagine he’s not thinking about retirement and we’ll continue to hear new music from him until he finally keels over. Unless you are one of the few who truly love the work they do, by age 55 chances are you’re planning the finer details of your retirement.
If you haven’t started saving money by 55, it’s going to be difficult to prepare for retirement by 65. According to Kiplinger’s calculations, in order to reach $1 million in ten years — and let’s not forget that a full retirement starting in 2018 is likely going to require much more than $1 million — it will take savings of almost $5,500 a month.
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The more you have saved at 55, the easier it will be to reach millionaire status. A retirement nest egg of $50,000 reduces your monthly required savings to just under $5,000 for the next ten years. With $100,000 banked, you’ll need to devote only $4,253 each month, and with $200,000 you’ll need to put about $3,000 away.
The article has these suggestions for those 55 right now:
Take advantage of your peak earning years to top off your savings. Add an extra $5,000 in catch-up contributions to your 401(k) savings and an extra $1,000 to your IRA. As you near retirement, reallocate your portfolio to 70% stocks and 30% bonds. Estimate your retirement expenses and your projected income. If you’re coming up short, consider working a few more years.
I imagine most people aren’t going to want to hear that they’ll need to work longer in order to afford a comfortable retirement. If nothing else, young people should look at these figures and realize that it pays off to start thinking about retirement as soon as possible. It’s never too early.
The trick will always be balancing the needs and desires in the present with the potential needs and desires in the future. Saving for retirement implies that one will live long enough to reach a certain age — a goal that is not guaranteed. Saving as much as possible for retirement and delaying enjoyment of your life will be a waste if you die while doing so. Then again, if that happens, you won’t have the chance to dwell on your over-planning for long.
Realize that unless you plan on moving somewhere the cost of living is inexpensive, it’s going to take a heck of a lot of money to retire in a manner you’d like to be accustomed to. $1 million is a nice round number, but even the value of today’s $1 million wouldn’t get current retirees very far. Retire in the future, and $1 million is valued less, thanks to inflation. The younger you are, the higher you’ll need to set your goals.
Updated September 24, 2015 and originally published February 11, 2008.