Don’t guess; find out now what you’ll need to retire

Do you know your number?

That would be the amount of money you need — including your Social Security and a pension (if you have one) — to retire comfortably.

A few years ago, the financial services company ING created a humorous advertising campaign around “Your Number.” Here’s how one ad went:

Neighbor: “Hey Clark, what you got there? (Clark is carrying a large, lengthy orange number amounting to just over $1 million.)

Clark: “It’s my number. It’s the amount I need to save to retire the way I want.”

Clark to neighbor: “Is that your number?” (The neighbor is clipping his hedges on top of which sits his orange number that just says “Gazillion.”)

Clark asks: “How do you plan for that?

Neighbor: “I blindly throw money at it and hope something good happens.”

The nonpartisan, nonprofit Employee Benefit Research Institute has been asking people for years about their confidence level when it comes to their ability to have a financially secure retirement. The most recent survey shows that many Americans aren’t very optimistic.

The institute found that 21 percent of Americans are not very confident about retiring comfortably and 28 percent aren’t comfortable at all. The latter figure is the highest percentage since the institute began surveying confidence levels.

So why are people so pessimistic?

It’s partly because they don’t know how much they will need for retirement.

Less than half of workers (46 percent) surveyed report they and/or their spouses have tried to make that calculation. And when asked how much they think they need to save, their estimates were high. Twenty percent guessed that they needed to save between 20 percent and 29 percent of their annual income, and nearly a quarter said they would have to save 30 percent or more.

“Many workers believe that they have to save substantial, perhaps even unreachable, percentages of their income each year to achieve a comfortable retirement,” said Jack VanDerhei, EBRI research director and co-author of the report. “In many cases these savings targets are aggressive, but they may not be based on a careful analysis of their individual circumstances.”

VanDerhei added, “Many people simply don’t or won’t take the first basic step to plan for a comfortable retirement.”

Workers’ confidence in having enough for retirement decreases as the average amount they think they will need to save increases. Americans 45 or older who aren’t at all confident about having enough money to retire believe that the percentage of income they need to save each year is, on average, 43 percent, an unattainable number for most.

There are many calculators to help you find your number. EBRI and its American Savings Education Council have created a retirement planning calculator, “Ballpark E$timate,” at www.choosetosave.org.

It’s likely when you do a retirement calculation, you’ll see a big number. And you may find you’re not on track to hit it.

“We know people get frightened when they see the gap,” said Mathew Greenwald of Greenwald &Associates, which conducted and co-sponsored the retirement survey.

But as scared or discouraged as people get, once they know their number they can set more realistic targets, VanDerhei said.

“Many people can make better decisions and have more control when they know,” Greenwald said.

Look at these numbers from the survey:

•57 percent of workers reported that they had financial assets totaling less than $25,000, not including their primary residence.

Only 23 percent of retirees feel very confident that they had done a good job of preparing for retirement.

16 percent of workers and 13 percent of retirees said their level of debt is a major problem.

Only 50 percent of workers and 52 percent of retirees indicated that they could definitely come up with $2,000 if an unexpected need arose within the next month.

Perhaps you’re thinking your number might not need to be so large because you’ll just work longer. In 1991, 19 percent of workers planned to retire before age 60 and another 31 percent between the ages of 60 and 64. But now, only 9 percent plan to retire before age 60, and only 14 percent plan to retire in the 60-64 range.

But what if you can’t work?

Almost half of retirees had to retire before they expected, according to the retirement institute. “The survey results contain a lesson for workers: Do not put off too much saving,” Greenwald said. “Plan to save at least a foundational amount by age 60. The risk of waiting beyond that to build a foundation is too high.”

An important part of the retirement planning process is figuring out how much annual income you need to retire comfortably. And this means you need to know your number.

Washington Post Writers Group

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