THE RETIREMENT CAFÉ
By Ernie J. Zelinski

SAVING FOR RETIREMENT

Money isn't the most important thing in life, but it's reasonably close to oxygen on the "gotta have it" scale.
- Zig Ziglar

Saving for Retirement

"How much money do I need to retire?" is a common question typed into Google.

Variations of this question include:

How much do I need to retire?
When can I retire?
Is 2 million enough to retire?
How much should I save for retirement?
How much money do I need for retirement?

As indicated in my book How to Retire Happy, Wild, and Free, planning for retirement, if and when it is pursued, generally focuses on financial issues.

Unfortunately, according to the National Save for Retirement Week website, research has shown that nearly half of all workers in the United States have less than $25,000 in total savings. Even more startling is the fact that slightly more than one in five workers say they have no savings of any kind.

We only need to save $49 a month for a happy retirement. That's how much we'll need for our cable TV bill.
- from Glasbergen cartoon

Why Americans Are Not Up to Par with Their Retirement Savings

Billy Boy Franklin stated, "Americans have mastered the art of being prosperous though broke." In other words, they have not saved enough for retirement.

Here are some 10 signs that many Americans are not saving enough for retirement.

Roughly half of all working Americans don't participate in a retirement plan or don't have an employer-sponsored plan in which to participate.

A huge number of adult Americans - by one estimate 150 million of a potential 200 million - aren't saving for retirement in any meaningful way, if at all.

Dave Ramsey, a personal-finance expert and talk-radio host, cited a recent poll in which 80 percent of Americans said they believed their standard of living would go up at retirement.

"Our culture today tells us that we deserve to have everything we want because we can charge it," Dave Ramsey says. "Previous generations thought you could only have something if you could pay for it. Their lifestyles were much simpler, and retirement was a time to simplify even more."

Many Americans are counting on Social Security for their retirement. Social Security, however, stands on unstable financial ground.

The average total income for those 65 and older in America is $25,610, and the median is a meager $16,770, according to EBRI Notes, a publication of the Employee Benefit Research Institute. That means retirees are living on roughly one-third of their pre-retirement incomes. And that's a far cry from the 70% to 80% that income replacement experts suggest Americans need to maintain their pre-retirement standards of living.

Most Americans spend more time planning for vacations and holidays than planning for their retirement, according to the Employee Benefit Research Institute. Seventy percent of workers say they do not have a formal, written financial plan. According the Retirement Confidence Study from the Employee Benefits Research Institute, only 2 in 5 workers have attempted to do a retirement savings needs calculation, and one-third of those who have can’t remember the result.

A recent study indicated that said a whopping 21 percent of Americans see winning the lottery as an important wealth-building strategy. The odds of winning the Mega Millions Jackpot are said to be one in 175 million.

Another 14.9 percent of Americans are relying on an inheritance to carry them through. Of the 20 percent of Americans who will inherit some money, most will receive less than $49,000. This is enough to buy a nice new car and perhaps a garage to put it in, but certainly not enough cash to fund a carefree retirement.

Talk about credit crazed - the average American household owns 13 credit cards, and 40 percent of them carry a balance, up from 6 percent in 1970. The good news is that the no-money-down mentality may not be so pervasive any longer - hopefully it will be put to rest forever.

Most American retirees have very little money because they never learned how to save their cash. The typical 50-year-old American has earned a great deal of money in their life time but according to one financial report, has savings of only $2,300.

The Good News about

" How much money do I need to retire?"

Particularly if you are a baby boomer quickly approaching retirement, you may be concerned whether you are saving enough for retirement.

The good news is that many people may be overestimating how much money they need once they leave the workforce. Several research studies show that people generally spend a lot less as they age. (Even so, this is not a reason to become casual about how much you are saving.)

I along with well-known actuary Malcolm Hamilton and syndicated columnist Scott Burns of the Dallas Star have been saying for years that the 80 percent figure is idiotic. Common sense says that if a person makes $500,000 a year that the person does not need $400,000 a year to retire. In fact, no one needs $400,000 a year to retire.

In Chapter 1 of How to Retire Happy, Wild, and Free , I give eight good reasons why the large majority of retirees, whether they live in Canada, the U.S., or other Western nations, can live on far less than 80 percent of their pre-retirement income.

Indeed, government statistics indicate that retirees live comfortably on 45 percent to 62 percent of their pre-retirement income.

For instance, my friend Jim took early Canadian Pension Plan of only $435 a month. This is his total regular income and he has no assets to speak of except for an Airstream trailer and a older car. His income is supplemented by a few hours a week work that he gets from a mutual friend who manages a medical clinic. Jim lives pretty well and is one of the happiest people I know. He does admit that he wishes that he had a bit of money saved for emergencies, however.

Another friend George is 65 and collects about $1,450 in Canada Pension Plan and Old Age Security. This is his total income. George lives in a subsidized apartment. Get this: George saves $450 to $500 a month.

The issue of "how much do I need to retire" is best addressed by being totally honest with yourself about what are "needs" and what are "wants."

Let's face it: All your needs have always been provided since you were born - otherwise you would be dead! So keep that in mind if you want to cut your expenses and overheads.

I recall talking to an artist who was making only about $1,200 a month and had to cut back because his income dropped to $1,000 a month. He told me how he surprised himself that he was able to cut back and make ends meet when he took a hard look at what he can do without. So if this guy can cut back, over 90 percent of Canadians and Americans can cut back if they stop lying to themselves and others about what their "needs" are.

Of course I haven't completely answered the question, "How much should I save for retirement?" simply because you are the only person who can answer this. But I should have answered the question: "Is 2 million enough to retire?"

If you want to retire happy regardless of your income, then you should read How to Retire Happy, Wild, and Free . It gives retirement wisdom that you won't get from your financial advisor.

Purchase How to Retire Happy, Wild, and Free Today:

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More Quotes Relating to Retirement Savings and "How Much Money Do I Need to Retire"

This may come as a shock to some, but if you really want to get rich,
the first thing you need to learn is how to spend money - or NOT spend
it - as the case may be. And what with national consumer debt and bankruptcy numbers reaching ball time highs in the U.S. in 2008, it's apparent that there's more than just a little foolish spending going on.
- Rosalind Gardner

The sports car and sailboat are investments for my retirement. I'm using them to attract a woman who support me in my old age.
- Glasbergen talking to financial consultant

Retirement can be a great joy if you can figure out how to spend time without spending money.
- Author Unknown

I advise you to go on living solely to enrage those who are paying
your annuities. It is the only pleasure I have left.
- Voltaire (in retirement)

Retirement: The time in your life when time is no longer money.
- Unknown wise person

It's an absolute fact that as people get older they spend less money.
- Rick Ferri president of money-management firm Portfolio Solutions in Troy, Mich.

You can be young without money but you can't be old without it.
- Tennessee Williams

By the time I have money to burn, my fire will have burnt out.
- Author Unknown

My retirement investments are diversified. Blue lottery tickes, yellow lottery tickets, green lottery tickets, red lottery tickets ...
- from Glasbergen cartoon