This is a Guest Post by Miranda Marquit. As she does in all her writing, she brings up some great tips and I must admit myself that right now I am not saving to the level that is sensible!
Study after study reveals that most Americans aren’t saving enough for retirement. Unfortunately, when confronted with this reality, too many consumers believe that such statistics don’t apply to them. After all, you set aside money each month for retirement. You must be covered, unlike those who are saving nothing for retirement.
It’s easy to become complacent about what you are doing for retirement. The truth, though, is that setting aside $100 or $200 a month isn’t likely to cut it when it comes to building your nest egg – especially if you start later. Rather than just assuming that you are adequately prepared for retirement, you need to re-assess, and make sure you truly are setting aside enough for a comfortable retirement.
How Much Do You Need?
One of the best things you can do is use a retirement calculator to help you determine how much money you need to retire. First, you need to determine how much money you need. There are calculators that help you figure out a total nest egg, or a monthly income. Realistically estimate your expenses in retirement (you can use your current needs as a baseline), and then use a calculator to project what you need over the course of a 30 or 40-year retirement.
Once you know how much you need to retire, it’s time to figure out how much to set aside each month. Investment and retirement calculators provide you with an idea of how much to set aside every month to reach your target. Now that you know how much you should really be setting aside, it’s time to compare it to how much you actually do set aside.
Closing the Gap
Chances are that you aren’t saving enough money for a comfortable retirement. Once you perform your own analysis, note the gap between how much you are saving for retirement right now, and how much you should be saving. If you are saving $200 a month, but should be saving $600 a month, you need to find another $400 to close that gap.
Your best chance of closing the gap is a combination of cutting back on some of your expenses, and looking for ways to earn more money. Go through your budget and look for unnecessary spending. These are items that you can cut from your expenses. Instead of wasting that money, you can turn it into wealth.
However, you might not be able to cut so much from your budget each month. If that’s the case, you will also need to look for ways to earn more money. You can work hard and ask for a raise, start a side hustle to bring in extra money each month, or do odd jobs. Add that money to what you save by streamlining your budget, and you have a better chance of closing the retirement gap.
You probably need a retirement wake up call. Before you decide that you are setting aside enough money for the future, run the numbers. Use the tools available to you, and face the realities of your retirement. Once you understand where you stand, you can make a plan to improve your situation and close the retirement gap.
Miranda Marquit is a freelance writer and professional blogger providing content for various finance-related blogs. Her own blog is Planting Money Seeds.