Your Retirement Journey
Two of the many questions plan participants face during their retirement journey:
- How much do I need to save in order to be able to retire comfortably one day?
- How do I make the sacrifices to actually get there
BPAS offers a variety of tools in the Participant Education Center and in the participant website’s Roadways Mile Marker to help educate participants about these important questions. The answers include participant-specific information regarding overall assets, balances held in IRAs and other qualified plans, spousal financial information, estimates on social security, and more.
How Much Do I Need To Save In Order To Be Able To Retire One Day?
The question seems simple enough, right? The answer, however, is quite complex, as it must take into account many variables that are unknown – or guesses at best. When will you retire? How long will you and your spouse/partner live? What kind of spending habits will you have? How much in healthcare related costs will you be burdened with? These are just a few of the questions that must be answered to paint a proper picture of what you will need to retire comfortably. To simplify the complex task of determining what you need to be “retirement ready”, experts have formulated easy ways to create relatively close estimates. Many financial planners will tell you that if you can accumulate ten to twelve (10-12) times your annual compensation in combined assets, you will stand a good chance of being “retirement ready” if you choose to stop working at age 67. The concept of ten times pay in a combined retirement nest egg is in addition to benefits you would receive from Social Security and outside pensions. Note: Given that there is a baseline cost of living today, most financial planners feel that there needs to be a minimum floor to this calculation, such as $750,000 in combined assets to meet the test. The point is, if an employee retires at a time when he is earning $20,000 a year, it is hard to imagine that they could live for 15 or 20 years on $200,000 in total assets. Therefore, the “10 times pay” figure may be 15 or 16 times pay for lower wage earners to account for this minimum cost of living.
How Do I Reach The Ten Times Pay Goal?
A large number of financial planners will tell you that if you can invest 10% of your compensation for a 35 or 40-year working career, you can reach your retirement readiness goal. Unfortunately, the vast majority of employees today are not on course with this target. What changes can you make if you’re not on target?
- Increase your savings rate (even if it is over a several year period)
- Delay your anticipated retirement date to a later year
- Contribute at least enough to get the full amount of any employer matching contributions. Always remember — the biggest contributor to your retirement success will be YOU, not investment returns or employer contributions. The more you save, and the earlier you start, the better.
Always remember — the biggest contributor to your retirement success will be YOU, not investment returns or employer contributions. The more you save, and the earlier you start, the better.
Want to see examples of how a few employees worked toward their goal of 10X pay?