(anyone else an NPR fan on the daily commute?). Before you gripe about this being a lame task, you should read this article on Forbes.com about how studies have shown that those people who have calculated their retirement needs end up with much more saved. This calculator from AARP is my current favorite because of its simplicity.
The White Picket Fencers
Okay, so maybe you do have a steady income, 2.5 kids, a dog, and a white picket fence. Right now, this is me [minus 1 kid (yes, we have 1.5 children right now), the dog, and the white picket fence]. In this situation, the calculator really does come in handy. The graph it gives you at the end allows you to tweak your annual savings percentage or lifestyle to make your projected retirement funds cover your expenses. It's certainly not a perfect calculator, but I don't think the perfect one exists, and if it did it would take forever to fill out. This one will give you a rough idea on what percentage of your income you should be saving annually. It's probably a good idea to check in on your savings goals at least once a year, since your life situation and income will probably be fluctuating over time.
The Grad School People
I know a lot of people fall into this category. It's tricky to pay 15 percent of your income when you don't have one (or it's more of a small stipend). And it's difficult to plug hypothetical numbers from your future career into the calculator (although, this may be an informative exercise...) Here's my opinion (which was guided by this article by Kimberly Palmer on usnews.com): if you're struggling to make ends meet, the first step is just to open a Roth IRA. (You know how sometimes just opening the assigned book was the hardest part in high school?) I opened mine through Fidelity and it was pretty straightforward. That way it will be a lot easier to start saving once you're making money if you've already gone through the first hurdle of setting up an account. If you can spare any amount of earned income from a part-time job, go ahead and put that in your Roth IRA (within the limits, of course). Then commit to start living in a fiscally responsible way NOW (i.e., budgeting, etc.) so that when you do get that full-time job, you can hit the ground running paying down debt and saving for retirement.
Personally, it was harder for me to get jazzed up about saving for retirement when I was single than now. But all the more reason to "do the numbers" and make a plan, just as outlined in the white picket fence scenario. Maybe you don't know the whole path the future holds, or maybe you do. Either way, just do it based on what your plan is now. Trust me, it's empowering.
|This is from when Lisa and I were both single. I think she was dating Bryan at the time, though.|
The "Just Making It" People
If you feel like you are just scraping the bottom of the barrel to make ends meet and don't see much hope for change, I would honestly recommend checking out The Total Money Makeover by Dave Ramsey from your local library. I think Dave Ramsey has good general ideas for everybody (I liked this book and have recommended it and his ideas to many people), but he is especially good at reaching out and helping people in this category. He lays out a pretty specific (though intense) program to help people go from scraping by to financial independence.
I hope whatever your situation is, you can find a way to start saving for retirement that works for you and makes you feel secure.
Speak up-- Do you have any retirement savings advice for people who don't fit the "white picket fence" group?
- "These Calculators Can Raise Your Odds of Retiring Well" by Janet Novack on Forbes.com (1/9/2013)
- "AARP Retirement Calculator: Are You Saving Enough?" on AARP.org
- "Should Grad Students Save for Retirement" by Kimberly Palmer on money.usnews.com (3/6/2008)