How Much Do I Need for Retirement? Your Guide to Saving for Retirement:

What to Know about Saving Money for Retirement - "How much do I need for retirement," is a very common question. The most common answer is usually, "More than you have!" The average American lives about 20 years after retirement - and yet, fewer than half have an idea of how much they will need to ensure their "golden years" are, if not extravagant, then comfortable. A few years ago, $1 million was touted as the "magic number" that you needed for retirement; but today, that figure is, according to some experts, too low. And this causes panic in everyone who has started to save late or whose 401k was decimated in the financial crisis of 2008. Many Americans, particularly those who have lost their job in their 50s or 60s, haven't saved as much as experts say they should. Young people starting out are burdened by debt from college and credit cards. What can you do if you find yourself in either situation? This guide will take a look at how much you need for retirement, and how you can reach that goal.

How Are Your Retirement Savings Looking? - If your retirement fund is looking a little lean, you're not alone. According to the Employee Benefit Research Institute, 43 percent of workers have less than $10,000 in retirement savings. Twenty-seven percent have less than $1000. In 2009, about 75 percent of workers say they saved for retirement. A year later, this decreased to 69 percent. One final statistic: only 16 percent report feeling confident that they have saved enough for a "comfortable" retirement. For many Americans, shorter term financial emergencies have trumped the importance of saving for retirement. While many people saw their 401k rebound in 2009 and 2010, job losses, mortgage issues, college tuition increases, cost of living increases, disappearing pensions, and suspension of many corporate 401k matches have made saving for the long-term difficult. Not impossible though. Millions of people are discouraged because they have not saved or have not saved enough, and so they think, "What is the point of starting now?" Even if you can't save a million dollars in the next five years, you can save something, and that is better than nothing. But being comfortable and financially secure during your retirement is far preferable than relying solely on social security. Which brings us to that magic number: how much do you have to save, and how can you get there?

How Much Do You Need for Retirement? - You need as much as you can get. That's not a very helpful answer, is it? This is why financial geniuses have created the retirement savings calculator. There are a variety of these available, but all you need to do is enter in some data. Let's take a look at the retirement calculator (http://moneycentral.msn.com/retire/planner.aspx) generated by MSN Money. Say you are 40 years old today and want to retire at age 65. Your life expectancy is 85 for the purpose of this exercise. Here are the other figures you need to enter, along with our example:

*Your annual income: $50,000
*Percentage of income you save for retirement each year: 10 percent
*Your current retirement savings: $5000
*The average return on your investments before retirement: 9 percent
*The anticipated return on your investments after retirement: 6 percent

If you retire at 65, you will have saved $311,072. If you factor in your projected social security benefits (a bit over $12,000 for our example), you'll withdraw $27,004 per year from your account. At this rate, you will run out of funds by the time you are 79. Assuming you did live to 85, you'd leave a debt of $172,402. If you are in a position like this, you can cut down on your living expenses. Maybe "comfortable" can mean something different for you. You could also increase the amount that you save. Experts say that we should be saving 15 percent of our incomes for retirement. Increase that by as much as is comfortable and doesn't interfere with other savings goals. According to some figures, if you are 55 and earn $40,000 a year, you would need to save 27 percent of your income. This is simply unrealistic for some people, but again, there is the option of "downsizing" your retirement or delaying it. If you put off retirement until age 70, you need to save less per year. Instead of 30 percent or more, you can save 15 percent. On the bright side, they say 70 is the new 65, and about 66 percent of baby boomers plan on working past the traditional retirement age of 65. Now, let's change the numbers a little for a rosier outlook. Let's say that you are 30 and you make $40,000. You are making less than in the previous example, but you have 10 more years to save. Assuming all the other figures are the same, you will have $515,525 in savings. Assuming you live to 85, you leave $147,649 in your estate. Quite a difference ten years makes, isn't it? You might even enjoy an early retirement. Imagine if you'd started at 20!

How Do You Save for Retirement?:

After you have used a retirement calculator, it is time to figure out how you are going to reach that goal. The most important thing to do is start saving now. Go. Right now. Put some money in the bank. Adding to a savings account won't net you much though. You want to make your money work for you, and despite economic ups and downs, the stock market is the best way to grow your wealth. Putting your money in an IRA or 401k type of retirement savings plan (http://www.dol.gov/dol/topic/retirement/typesofplans.htm) makes sense. If you are 25, you have the time to see market fluctuations through; you can afford to have a more aggressive portfolio. As you draw closer to retirement (http://www.bankrate.com/finance/financial-literacy/age-specific-investment-advice-1.aspx), you move your assets to more secure markets, such as mutual funds. This is designed to retain your wealth rather than add to it substantially. The first step is to find out if your employer offers a retirement savings program. If so, they probably offer a matching contribution. You can have the money deducted right from your paycheck and put into the account. This is the best way to do it because you never see the money. You can forget about it. You can also open an IRA on your own. Roth IRAs are taxed when you put the money in, unlike simple IRAs, which are taxed when you withdraw the funds. The advantage of the Roth is that it is taxed: you're done. Simple IRAs are not taxed now, but instead, when you withdraw the money. This is beneficial because you will have a lower tax rate when you are older and not working. Either will work for retirement savings, but you may find one works better for you. Go to a trusted bank and talk to an investment advisor, who can help you decide which is a better avenue. There is a host of ways you can increase your savings for retirement, including:

*Putting retirement off for another few years.
*Decreasing your expenses so you are prepared to live on less.
*Saving a larger percentage.
*Saying no when your grown children or college student ask for a loan. They have a few decades left to work; don't take on a loan for them. You need to save for your retirement. They can work off their own debt and save for their own retirement simply because they have longer to work.
*Putting any raises, bonuses, and tax returns directly into a savings or retirement account. Don't even count it as income; don't appropriate for anything but your retirement. You will learn to live without this money and putting it away will be painless. And very fruitful after a few years.

The most important thing is to not give up. Whether you're 55 and haven't saved or 30 and think there is no point because you'll never get to $1 million, it is vital that you save for retirement. Something is better than nothing, and investing small amounts steadily can yield tremendous returns. Retirement (http://www.aarp.org/money/) is possible; it may not look like you thought it would, but it can be comfortable.

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