Are You Saving Enough To Retire?

by Peter G. Miller
October 28th, 2008

How much will you need for retirement?

This is important stuff because with good planning you can determine well in advance whether or not you are likely to need a reverse mortgage.

You can get a good idea with the calculator available on Choose to Save.

The calculator asks a number of questions which can be answer instantly such as you age, current income, planned retirement age and what percentage of your current that you’ll need after retirement.

The are also some questions which require a guess — such as a request to estimate your “expected age of death.” (Yuck)

It takes about two minutes to complete the form and then it generates “the dollar amount you will need to save this year.”

You can see where this is going. If the amount you need to save is more than you’re putting aside then either you will have to save more or have less when you retire.

This is somber stuff but it does bring up a point: Whatever happened to savings and planning for the future?

Savings is not just a theory — you can see the real numbers and the real data with the Choose-To-Save calculator.

What is also not a theory is that we are saving less, much less.

How bad is it? Take a look at the figures below from the St. Louis Federal Reserve Bank which are based on data from the Bureau of Economic Analysis. Notice how savings increased in May and June — the months when the economic stimulus checks went out.

Some will say that saving are not important because there are ways to set aside assets besides sticking cash in some place which is safe. For instance, look at the huge amounts of equity which have been built up in stock portfolios and home values. That’s equity which can be quickly accessed by selling shares, refinancing a property or getting a reverse mortgage.

Oh well, at least that was the thinking until a few weeks ago. With the liquidity crunch there is now both less equity and less access to the equity that remains.

Date — Value

2008-01-01 — 0.1
2008-02-01 — 0.3
2008-03-01 — 0.2
2008-04-01 — 0.2
2008-05-01 — 5.0
2008-06-01 — 2.8
2008-07-01 — 1.9
2008-08-01 — 1.0

What these numbers suggest is that we can and should do much better — savings rates exceeded 10 percent during some months in the 1970s and 1980s. In fact, during both October and November 1981 the savings rate stood at 12.5 percent — and not too many people worried about foreclosures or failing banks.

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