Saving enough money for a comfortable and worry-free retirement is still an area where many Americans are falling behind. While retirement preparedness has improved over the last few years, four in 10 Americans are not saving any money or altogether failing to put together a strategy for retirement, according to this year’s Retirement Confidence Survey by the Employee Benefit Research Institute. Additionally, only 18% of those actively saving for retirement say they are feeling very confident in their ability to live a comfortable life after retiring.
Below, 12 Forbes Finance Council members share their expert advice on what steps any working American should take to ensure their retirement strategy is on track and to feel secure about their financial future.
1. Don’t Rely On Rules Of Thumb
A major reason Americans aren’t prepared for retirement is that they rely on rules of thumb or ballpark figures. For instance, the idea that you need a million dollars for retirement is overreaching for some, and too little for others. These figures can either seem impossible or leave you lacking. Instead, you should get a sense of your specific needs in retirement (such as traveling expenses). – Elle Kaplan, LexION Capital
2. Don’t Be An Ostrich With Your Head In The Sand
As much as you may not like the answer, start using a tool that projects your retirement income. As a general rule of thumb, start with your current take-home pay. If your retirement income projection meets your current take-home pay and you’re content with your lifestyle, you’re in a good shape, so stay the course. If you don’t like the answer, make the necessary recommended adjustments ASAP! – Paul Ewing, Prosperity Advisory Group
3. Don’t Forget The Cash Flows
Meet with a financial planner. Financial planners can help you run cash flow projections which are an integral component of retirement planning. Focusing solely on investment management is not enough. Financial planners have the tools and experience to help you define your goals, assess your financial condition, and project your probability of success with respect to your retirement. – Amir Eyal, Mylestone Plans LLC
4. Take Advantage Of Free Online Tools From Trusted Services
Fidelity, Schwab, and Vanguard are among the most trusted names in financial planning. Each provides free calculators and guides to help you calculate how much you should aim to save. As a start, go to a search engine and enter “Fidelity retirement calculator.” You will be guided through every step of a process the way a Certified Public Accountant (CPA) might do in person. – Atish Davda, EquityZen
5. Seek A Financial Planner’s Advice
Most financial planners use software programs for retirement planning. The plans are customized for each client using their current data and their desires for retirement. The plan is then tested using a Monte Carlo simulation to determine probability. The goal is to modify the plan until the simulation meets the retirement needs with the highest probability of achievement. – Rob Gabridge, Tarfis Wealth Management
6. Use Helpful Benchmarks
There are very helpful benchmarks to keep in mind as you near retirement age and are trying to measure how much should be saved by age. In Charles Farrell’s book, Your Money Ratios, he uses a set of formulas to determine how much you must accumulate to be on the right track for retirement. By age 35, you should have about 1.4 times your annual salary; by 45 – 3.7 times; and by 55, you should have 7.1 times, eventually going up to 12 times your pay.