How much money will you personally need to save for retirement?
If you don’t have a clear idea, take a guess.
Did you guess? If you did, you’re in good company. When workers surveyed recently were asked to estimate the money they’d need for retirement, nearly half of the people who supplied a dollar amount said they’d come up with the figure by guessing. Only 7 percent said they’d used a retirement calculator.
That’s disappointing, says Catherine Collinson, president of the Transamerica Center for Retirement Studies, which asked this question as part of its 18th annual retirement survey, conducted earlier this year among more than 6,300 U.S. workers.
“We have asked this question for many, many years,” says Collinson. “The responses just don’t budge.”
Adds Collinson, “With all of the retirement calculators that are available — and many of them are free — it’s so surprising to me that so many people are not taking the 15 minutes or half-hour to see where they stand.”
Collinson says people are often unwilling to calculate their retirement needs — 47 percent of them said they were guessing, compared with 11 percent who used a calculator or worksheet — because they suspect the result they’ll see will look like an impossibly high dollar amount given their current savings.
But, she says, being confronted by your estimated needs can get you thinking about changing the assumptions behind your retirement, or the tradeoffs you might make: “Am I not saving enough? Is there any way to squeeze more out of my budget?” It might also get you thinking about working longer or cutting back to part-time hours after you reach a certain level of financial security, she says.
“Seeing those numbers is a very abrupt starting point,” says Collinson, “but so much can come from it, and so few people are taking that step.”
Among the many useful calculators available for free online, here are a few sites where you can find some standouts:
- AARP: Answer a few questions about your (and your partner’s, if applicable) earnings and savings, and you’ll see an estimate of how much your hoped-for retirement will cost you and whether you’re on track.
- Social Security: The retirement estimator will give you an idea of what your monthly benefits will be, based on your specific work record.
- Vanguard: Move the sliders on Vanguard’s one-page retirement calculator to see how different variables will affect a single person’s retirement income. If you’re already pulling money out of retirement accounts, the nest egg calculator can give you an idea of how long your money will last.
- T. Rowe Price: This detailed retirement income calculator, which the firm estimates takes 10 minutes to fill out, is a favorite of longtime personal finance journalist Walter Updegrave.