5 Retirement Savings Questions to Ask Now

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According to the Pew Research Center, 10,000 baby boomers now reach the traditional retirement age of 65 every single day. Some of these boomers have planned well for their financial security in retirement — but, unfortunately, many haven’t.

A study conducted by GoBankingRates found that one-third of Americans have not saved any money at all yet for retirement. And 23 percent of Americans have saved less than $10,000 for retirement. The study found that 18 percent of Americans have saved between $10,000 and $99,000, 13 percent have saved between $100,000 and $299,000, and 13 percent have saved $300,000 or more for retirement.

So how can you be among the minority of Americans who is saving adequately for retirement? Here are 5 questions to ask that can help you determine if you are on the right track to retirement financial security:

1. “Is saving for retirement a financial priority for me and my spouse?” This is the first and perhaps most important retirement saving question. Because if saving for retirement isn’t one of your financial priorities, it will probably get pushed aside for other things that while may not seem as important, certainly seem to be more urgent.

This is one of the biggest challenges of saving for retirement: Prioritizing something that is very important, but might not seem urgent at the time. Paying the mortgage, car payments, insurance premiums, college tuition bills and other immediate expenses is urgent — these must be paid now. But retirement is a long way off, which can make it easy to push to the bottom of the priority list.

One way to get past this mental hurdle is to view retirement savings the same way you do these and other immediate expenses. Choose a percentage of your monthly income to save for retirement and have this amount automatically contributed to a retirement savings plan — just like your mortgage payment is automatically drafted from your checking account each month.

2. “Are we maximizing retirement plan contributions?” Once you’ve made retirement savings a priority, your next step is to contribute as much money as possible to one or more retirement savings plans. This probably won’t happen overnight; instead, set a goal of maxing out retirement plan contributions by a particular date in the future.

In 2016, you and your spouse can each contribute up to $5,500 to an Individual Retirement Account (IRA), or up to $6,500 if you’re age 50 or over. Or you can each contribute up to $18,000 to a 401(k), or up to $23,000 if you’re age 50 or over. And if you own a business, you can contribute even more to a SEP-IRA: up to $53,000 in 2016.

3. “Have we decided when we might want to retire?” Regardless of how old you are, it’s a good idea to give some thought now to when you’d like to retire. Doing so will give you an idea of where the “goal line” is so you can measure your progress toward the retirement end zone.

While the traditional retirement age is 65, the average retirement age in the U.S. is 63. Of course, everyone is free to decide when they want to retire based on their lifestyle goals and financial resources. By setting a prospective retirement date now, you can start to visualize and plan for the day when you’ll cross over the retirement threshold.

4. “Do we have a rough idea of how much money we’ll need to live comfortably in retirement?” This is probably the most difficult question for pre-retirees to answer because there are so many uncertainties involved. For example, what will the future rate of inflation be? How healthy will you be after you retire? And the biggest unknown of all: For how many years will you live in retirement?

A good place to start is to estimate how much money you’ll need to meet your annual retirement living expenses. One rule of thumb is to plan on needing about 70 percent of your pre-retirement income after you retire, but this is just a guideline. You might need more or less depending on the retirement lifestyle you want to live. Once you come up with a number, multiply this by the average number of years spent in retirement (18 years) to come up with a ballpark figure.

5. “Where might we want to live when we retire?” This could have a big impact on the previous question because the cost of living varies widely in different areas of the country. If you move to a lower-cost area, you might be able to get by with a smaller retirement nest egg, or the opposite is true if you move to a higher-cost area.

The answer to this question could also affect whether or not you will carry a home mortgage after you retire — which, in turn, will have a big impact on your income requirements in retirement. If you pay off your mortgage before you retire and stay in your current home — or sell it and move to a similar priced home in an area with a similar cost of living — this could give you a lot more retirement financial flexibility.

If you have more questions about saving for a financially secure retirement, please give us a call. We’d be glad to help you answer these and other retirement savings questions.


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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