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Do Your Retirement Savings Match Your Age?

Here’s a question I hope you’re all asking yourselves as 2009 comes to a close: “How much do I need to be saving now to ensure that I am ready for retirement?”

Retirement should be a top priority when it comes to our savings and personal finances. I can tell you though, some real estate agents struggle to put away a percentage of a less than static income.

So what can you do? As CFO of a company whose mantra is “lead with revenue,” my experience is that it’s never too early to start saving for retirement. Whether you’re 30 years away or much closer, use these simple guidelines to calculate how much you should be putting away for your retirement right NOW.

Starting in your 20’s

Start saving now! Easier said that done, right? Take a look at this example from MSN Money which illustrates the importance of putting money away early:

  • If you begin saving for retirement at 25, putting away $2,000 a year for 40 years, you’ll have around $560,000, assuming earnings grow at 8 percent annually. Now, let’s say you wait until you’re 35 to start saving. You put away the same $2,000 a year, but for three decades instead, and earnings grow at 8 percent a year. When you’re 65 you’ll wind up with around $245,000 — less than half the money.

Set a goal to sock away at least 10 percent of your income. This should secure you a comfortable retirement in your golden years.

Starting in your 30’s

Congratulations if you got on the savings-bandwagon early. If not, here are three options to put you closer toward your retirement goals:

  • Save 10 percent of your income to put food on the table in retirement.
  • Save 15 percent of your income for some comfort and the occasional vacation.
  • Save 20 percent to retire in style (and maybe even before you hit sixty).

Starting in your 40’s

Save, save, save! If you are just starting to save for retirement, you will need to seriously evaluate your current spending in order to make up for lost time.  Follow these guidelines based on your individual wants in retirement:

  • Save 15 percent to keep bills paid and food on the table.
  • Save 20 percent to give yourself a little comfort.
  • Retiring early is probably not an option for you. Work a little longer, a little harder, be more thrifty and put as much away as you can.

Starting in your 50’s or later

Retirement is quickly approaching!  Unless you have a rich aunt who is guaranteed to will you a substantial sum, you will need to work longer before retirement and rethink you lifestyle now and in retirement.

  • Cut costs, downsize, and start saving every penny!
  • Consider signing up for the BOLD program to increase your income!
  • Make up for lost time by building your profit share tree for passive income.

To get an idea of how much you might need for retirement and how much to save in the next year, I suggest you check out SmartMoney.com’s Retirement Planning Worksheet. Keep in mind that different assumptions (investment performance, inflation rate, retirement age, retirement spending, years in retirement, etc …) will dramatically impact your number.  Play with your assumptions, but keep them real – it is unlikely you will be able to achieve a 20% investment return over an extended period of time!

Sock it away

Now that you have a savings goal, where should you save it? In addition to a Roth IRA, a Simplified Employee Pension (SEP) IRA may be a real estate agents’ best option for building a nest egg. Annual contributions (limited to 25 percent of each participant’s income) are tax deductible and investment earnings are tax-deferred. If you are an employer, special rules apply. Read more about the Simplified Employee Pension plan here. As always, contact your tax accountant to see if setting up a ROTH or SEP IRA is right for you or your business.

Good luck reaching your retirement goals!

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  • Vicki

    What a great reminder for me that I need to be putting money away – I so rarely think about it because it seems so difficult. I like the breakdown as well, I’ve never had a consultation regarding retirement so I never really knew how much I should be saving. This article is an example of one of the reasons I love KW so much: it’s not always about selling real estate, it’s about having and building a better life.

  • http://www.freemortgageconsultationtoday.com Naoma Doriguzzi

    Whew! I need to get a bit more on track! Great reminder for us all!

  • http://www.nyhomeshowcase.com Cristina Callegari

    Having been a Financial Advisor prior to becoming a Real Estate Agent, I’d like to add one suggestion to the list. Invest in Real Estate :) If you purchase an Investment Property while in your 30s the mortgage will be paid for in your 60s and the Rental Income you earn can help supplement your retirement income, or, you can chose to sell the property which will have appreciated nicely over 30 years, and in the meantime your tenants would have paid off most of, if not all of your mortgage.

  • Pingback: Retirement savings average by age

  • johnexo

    Investing money is not an easy task. Its the hard earned money you’re investing with an aim of yielding good returns. There are several ways one can invest money. It depends on individual’s what they feel is the right investment for them, be it socks, mutual funds, metals, real estate and so on….
    Ways to invest money

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