Ask the Readers: How much time do you spend each year planning for retirement?
‘œLast year Americans spent 19 hours planning for their retirement. That’s about the same amount of time they spent planning their Thanksgiving dinner.’ ‘“ Allstate advertisement
Retirement lasts a lot longer than leftovers. Yet, most people spend what equates to less than 2.5 business days each year on their retirement planning. Aetna did their own survey and found that 31 percent of pre-retirees would rather clean their bathroom or pay bills than plan for retirement. Below, we ask Queercents readers how much time they spend and how they define ‘œplanning.’
What it boils down to is a long term savings plan, but many people can’t even figure out the amount they’ll need to retire. Trent at The Simple Dollar explains A Simple Way To Calculate Your Number. Here’s how he’s figuring his number. It’s not that hard. Nor does it take a lot of time. But unless we do it, we don’t know what number we’re aiming for.
For our more scholarly readers, here’s an academic brief about preparing – or not preparing – for retirement:
Current workers anticipate using simple strategies in order to achieve these goals. More than one-third say they will simply take what they need to cover their expenses (36 percent), and 3 in 10 will try to leave their savings untouched for as long as possible (31 percent). Fewer anticipate using the comparatively complex strategies of taking only the earnings on their investments (18 percent) or taking a constant percentage or amount of money (10 percent). Equal proportions of current retirees report having used these approaches. Approximately one-third each take what they need to cover their expenses (35 percent) or try to leave their savings untouched (33 percent). Only one-quarter of retirees take the earnings on their investments (17 percent) or take a constant percentage or amount (8 percent).
Workers more likely to say they will take only the earnings or a constant percentage are those who have saved for retirement (compared with nonsavers), those who have calculated how much they need to accumulate (compared with those who have not), those expecting to receive money from a work-place savings plan, such as a 401(k) (compared with those who are not), and those with household income of at least $75,000 (compared with lower-income workers). The likelihood of planning to use these approaches also increases as their retirement savings goal increases.
So when people start saying they’ll live off the earnings of their portfolio or the passive income of their investments properties’¦ well, that’s code for they really have a plan to get them there.
What about you? Tell us how much time you spend each year on planning and then feel free to explain in the comments section how you define ‘œplanning.’
Photo credit: stock.xchng.
Oh, yeah. I’m guilty of not spending enough time on it. I have tried numerous ‘calculators’ and you get different results each time. And there is so much conflicting information out there (“You need a million to retire”; “You need $500,000”; “You need 2 million”) that I just give up.
Good post, Nina. I read a book a few years ago called “The Automatic Millionaire” and it was about how to save $1 million for retirement. The book says that if you automatically put $25 into savings each month starting at the age of 25, you’ll have $1 million by the time you’re ready to retire. I started a little bit later than 25, but right now I have my Roth IRA savings account, as well as an old 401k from my previous job that I will roll over into my Roth when January rolls around since I’m already maxed for this year. For me, the trick really has been to make those savings deposits automatic so that I never see the money and never have an opportunity to spend it.
I’ve met with the investment planner at my bank to talk about more aggressive savings strategies since I’m still really young. He recommended mutual funds with a high percentage in the stock market. But that just doesn’t feel right for me. I’m pretty risk averse.
I put myself in the 5-10 hours/year category. That’s about how long it takes me to run numbers through a couple of online calculators, and to rebalance my 401K once or twice a year.
What I find both amusing and frustrating is that different online calculators yield very different results. I’ve gotten answers ranging from “you need to save 3% more every year than you’re saving now” to “you could quit saving anything more and be fine.” I also put little stock in the traditional wisdom that you will need 85% of your current income in retirement. By the time I retire, I will no longer have a mortgage; I won’t have childcare expenses; I won’t be saving for retirement or my child’s college education. And yet these currently account for over 50% of my income.
So I take the online calculators with a large grain of salt, save diligently through my 401K, and focus my efforts on living below my means so I can afford to save more, rather than on coming up with some magic target number.
Rhea: I agree that the various “calculators” often arrive at the different amounts for “the number.” For me personally, I’ve tried to err on the high side just to be sure.
Serena: I think the last part of your comment would make for an interesting post. Why? To be honest, I never really knew that the local branch of most banks offer financial planning services. I’m curious how you settled on this option. I wrote a post long ago about When Do You NEED a Financial Planner and think that your thought process as a twentysomething (and that you’re risk averse!) would be a perspective worth sharing with readers.
S: I’m glad you brought up the needing “85% of your current income in retirement” rule of thumb. Here’s what I think is a really good article on this topic because after all:
And what is average?? We’re all so different… that it makes the advice out there even more confusing sometimes.