Urgent and Important: The New Retirement Savings Mentality
Adopting this can help consumers develop their retirement savings strategy, says
CFP Board Ambassador Scott Ward, CFP®
It is no surprise American consumers are in a retirement savings crisis – studies have shown that they are ill-prepared for retirement, with nearly 8-in-10 American workers with less than $250,000 saved for retirement. Often, it can be challenging for consumers to know what must be put away now to be prepared for the future.
While there is no set amount for each individual to save for retirement, what’s most important is that consumers recognize their retirement savings contributions are both important and urgent, says CFP Board Ambassador Scott Ward, CFP®.
“Often, clients will ask ‘how much do I need to retire?’ While I wish the answer was a simple number, it varies for each person or couple,” says Ward. “There are many factors to consider when setting your retirement savings goals. Even more, savings strategies will vary based on where you are in your life – people in their 20s will likely contribute less to their retirement savings compared to individuals who are in their 50s.”
To help answer how much consumers need to save to retire and demystify this important – and urgent – topic, Ward shares four scenarios for consumers to consider:
- What, and Who, is the Money For? Before determining the amount you need for retirement, decide whether you want to travel the world, move to a new state, donate to charity or support loved ones with your retirement funds. Clarity on these preferences can help shape both spending priorities for retirement and savings goals.
- Save to Cover 60-80 Percent of Work Pay: Your retirement savings goal includes your personal contributions to your workplace retirement plan, any employer contributions to your plan, plus any investment earnings you may receive over time.
- Retirement Dates are Sooner Than you Think: Almost half of retirees reported that they left the workforce sooner than expected, so be prepared. It is important to ensure your current saving and spending habits are complimentary and can support you, should you need to retire earlier than planned.
- Look out for Blind Spots: Keep your eyes peeled for the potential blind spots that could undermine your savings plan – like longevity in retirement and medical expenses as you age. With life expectancy rates close to 84 for men and 87 for women, consumers need enough savings to cover potential out-of-pocket medical expense or long-term care expenditures.
Certified Financial Planner Board of Standards, Inc. is the professional body for personal financial planners in the U.S. CFP Board sets standards for financial planning and administers the prestigious CFP® certification – one of the most respected certifications in financial services – so that the public has access to and benefits from competent and ethical financial planning. CFP Board, along with its Center for Financial Planning, is committed to increasing the public’s awareness of CFP® certification and access to a diverse, ethical and competent financial planning workforce. Widely recognized by firms and consumer groups as the standard for financial planning, CFP® certification is held by more than 83,000 people in the United States.