Unfortunately, retirement planning typically isn’t a top priority for most of today’s workforce; mortgage and debt repayment tend to be the more important financial priorities for many. However, when you are tied to debt or considered with other financial goals, retirement may seem like an uncomfortable time marked by financial stress and a decrease in their standard of living – but with the proper planning and forethought, saving for retirement can be simple, profitable, and stress-free.
Part of planning for retirement planning includes selecting types of investments and making a plan to save the necessary amount to live comfortably for years to come. With so many account options and financial companies available, it can be difficult to choose what types of investments you are comfortable with and, more importantly, which company you trust with your savings. From Roth IRAs, Traditional IRAs, stocks, and 401(k)s, it is important to research your options and select a diverse portfolio that works with your lifestyle.
Additionally, it is important to research and take advantage of any employer-sponsored retirement packages. Many employers will offer to contribute to your retirement account up to a certain percentage of your salary. Not sure what your employer offers? Your human resources contact should be able to give you more information and help you set up an account.
Savings by Age
Planning ahead is essential to a financially-stable future and retirement. Once you have selected your portfolio, it is important to meet certain benchmarks; one strategy is to hit savings goals by certain ages. For example, it is generally recommended that a 60-year-old should have saved at least ten times their annual salary, while a 30-year-old only needs half. Measuring your financial progress by these benchmarks is an easy way to ensure you remain on-track towards your dream retirement.
Savings by State
Another important consideration is cost of living in your area; if you are expecting to live in a more expensive city or part of the country, you will need to factor that into your retirement savings plan and put aside more money. For example, states in the U.S. northeast tend to have a higher cost-of-living; this is supported by the fact that average retirement savings in northeast states are significantly higher than western or southern states with a lower cost-of-living.
Check out this study and infographic to see how you align with others in your state or area of the country; you will see the average savings across the United States is roughly $218,181. The range, however, is from $153,182 (Wyoming) to $286,277 (Delaware).
Benefits of Retirement
No matter where you live, planning and preparing now will help you achieve your dream retirement–whether that is full of adventure or a more relaxing experience. Some retirees find meaning in volunteering their time or helping out a local nonprofit organization; while no longer in the active workforce, this can still help people feel a sense of purpose, create community with others, and pass their time in meaningful ways. In fact, over 26% of American retirees regularly volunteer for purposeful causes.
Beyond community service, other retirees find their passion by trying new hobbies, like crafting, learning to play an instrument, or picking up a new sport like golfing.
Despite the concerns about your current financial health or your many other financial priorities, like raising a family or paying off debt, retirement should always be a priority. The later you wait to begin planning and saving, the less money you will have to live a life of adventure or leisure. Instead, do your research early, make a plan, start saving, compare yourself to savings benchmarks, and take control of your financial future.
Andrew is a corporate finance consultant living in Los Angeles, specializing in distressed and bankrupt consulting. He helps clients review business plans and the general market and decide what steps to take next. He has a masters in finance.
Andrew enjoys running and biking in the San Gabriel mountains, cheering for the San Francisco Giants and eating (but trying not to gain weight).