How Much Do I Need to Save?

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Many Americans realize the importance of saving for retirement, but knowing exactly how much they need to save is another issue altogether. With all the information available about retirement, it is sometimes difficult to decipher what is appropriate for your specific situation.

One rule of thumb is that retirees will need approximately 80% of their pre-retirement salaries to maintain their lifestyles in retirement. However, depending on your own situation and the type of retirement you hope to have, that number may be higher or lower.

Here are some factors to consider when determining a retirement savings goal.

Retirement Age

thumbs upThe first factor to consider is the age at which you expect to retire. In reality, many people anticipate that they will retire later than they actually do; unexpected issues, such as health problems or workplace changes (downsizing, etc.), tend to stand in their way. Of course, the earlier you retire, the more money you will need to last throughout retirement. It’s important to prepare for unanticipated occurrences that could force you into an early retirement.

Life Expectancy

Although you can’t know what the duration of your life will be, there are a few factors that may give you a hint.

You should take into account your family history — how long your relatives have lived and diseases that are common in your family — as well as your own past and present health issues. Also consider that life spans are becoming longer with recent medical developments. More people will be living to age 100, or perhaps even longer. When calculating how much you need to save, you should factor in the number of years you expect to spend in retirement.

Future Health-Care Needs

Another factor to consider is the cost of health care. Health-care costs have been rising much faster than general inflation, and fewer employers are offering health benefits to retirees. Long-term care is another consideration. These costs could severely dip into your savings and even result in your filing for bankruptcy if the need for care is prolonged.


Another important consideration is your desired retirement lifestyle. Do you want to travel? Are you planning to be involved in philanthropic endeavors? Will you have an expensive country club membership? Are there any hobbies you would like to pursue? The answers to these questions can help you decide what additional costs your ideal retirement will require.

Many baby boomers expect that they will work part-time in retirement. However, if this is your intention and you find that working longer becomes impossible, you will still need the appropriate funds to support your retirement lifestyle.


If you think you have accounted for every possibility when constructing a savings goal but forget this vital component, your savings could be far from sufficient. Inflation has the potential to lower the value of your savings from year to year, significantly reducing your purchasing power over time. It is important for your savings to keep pace with or exceed inflation.

Social Security

Many retirees believe that they can rely on their future Social Security benefits. However, this may not be true for you. The Social Security system is under increasing strain as more baby boomers are retiring and fewer workers are available to pay their benefits. And the reality is that Social Security currently provides only 45% of the total income of Americans aged 65 and older with at least $63,648 in annual household income.1 That leaves 55% to be covered in other ways.

And the Total Is…

After considering all these factors, you should have a much better idea of how much you need to save for retirement.

For example, let’s assume you will retire when you are 65 and spend a total of 20 years in retirement, living to age 85. Your annual income is currently $80,000, and you think that 75% of your pre-retirement income ($60,000) will be enough to cover the costs of your ideal retirement, including some travel you intend to do and potential health-care expenses. After factoring in the $16,000* annual Social Security benefit you expect to receive, a $10,000 annual pension from your employer, and 4% potential inflation, you end up with a total retirement savings amount of about $800,000. (For your own situation, you can use a retirement savings calculator from your retirement plan provider or from a financial site on the Internet.) This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment.

The estimated total for this hypothetical example may seem daunting. But after determining your retirement savings goal and factoring in how much you have saved already, you may be able to determine how much you need to save each year to reach your destination. The important thing is to come up with a goal and then develop a strategy to pursue it. You don’t want to spend your retirement years wishing you had planned ahead when you had the time. The sooner you start saving and investing to reach your goal, the closer you will be to realizing your retirement dreams.

* The estimated average annual Social Security benefit payable in January 2016.

Source: 1) Income of the Population 55 or Older, 2012, Social Security Administration, 2014


The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2016 Emerald Connect, LLC

Addressing Retirement Plan Misconceptions

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Eighty-six percent of small-business owners say that America’s workers are facing a retirement readiness crisis according to a recent survey conducted online by Harris Poll on behalf of Nationwide.

The survey found that 34 percent of business owners surveyed currently offer retirement plans, and only 19 percent of business owners who don’t currently offer 401(k) plans say they will offer them in the future.

Joe Frustaglio, leader of Nationwide’s private sector retirement plans business, says that when he talks with business owners, they often have misconceptions that prevent them from starting a 401(k) plan for their employees. Those typically fall under three categories.

Misconception #1: Plans are too expensive for small businesses.

The reality: Small-business owners have options and can offer a plan that minimizes fee impact for both the owner and employee. Frustaglio says that if business owners haven’t looked for a plan in the last five or ten years, they should. Retirement plan prices have become significantly more affordable in the last decade – a time when health care benefit costs have dramatically increased. In fact, retirement benefit costs have decreased nearly 50 percent in the last two decades – one of the only employee benefits that has realized a price decrease.

Misconception #2: It’s hard to find a plan that can meet an individual business’ needs.

The reality: Plans of all sizes can be customized to deliver on the needs of the business owner and employees. In fact, business owners can offer employees retirement benefit options beyond traditional 401(k) plans. Frustaglio says it’s about finding the right solution for the business owner and his or her employees. Successful retirement plans happen when the business owner, his or her financial advisor and the retirement plan provider work together to support employees with the options, educational services and guidance they need.

Misconception #3: Small-business retirement plans can’t compete with large corporations’ plans.

The reality: Small businesses have access to the same retirement plan options as the largest corporations. Today, an owner of a business of any size can offer employees retirement plan options that can help them successfully save for retirement, including:

  • Automatic enrollment in the plan
  • Automatic annual escalation of employee contributions
  • Choice in investment selections
  • Immediate plan eligibility and vesting

Frustaglio says that professionally managed account choices are especially key because they give employees access to a “do it for me” option.

Business owners should contact their financial advisor if they have questions about their current retirement benefits plan or are interested in starting a plan. Nationwide also provides (opens in a new window)resources for business owners to learn about the support and options available to them.

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Cafe Latino With Friends

Cafe Latino Kitchen

Patricia Cundall was on Café Latino with friends cooking with friends hosted by Laura Ramirez-Drain.  Third Friday at 11:00 pm on Channel 10

Patty has been an agent at @Griffin-Owens Insurance for over 20 years.  She cooked a traditional Peruvian dish call Papa a la Huancaína on the show, which is a Peruvian appetizer of boiled yellow potatoes in a spicy, creamy sauce called Huancaína sauce. Although the dish’s name is derived from Huancayo, a city in the Peruvian highlands, this dish is from Lima – Perú.