How to save for Retirement in today's market

Jan 31, 2023, 10:24 AM by Nuvision 

For those who are investing or planning for their retirement, the past couple of years have been challenging, to say the least. From turmoil in the housing and stock market to historic inflation driving up the price of rents and groceries, savings and retirement planning have unfortunately taken a back seat for many Americans. In fact, according to a study from Bankrate, most Americans can no longer keep up with their retirement savings.

The study found that 55 percent of Americans believed their retirement savings were no longer where they needed to be. "More than one-third of workers feel they are 'significantly behind' on their retirement savings," says Greg McBride, CFA, Bankrate's chief financial analyst. "And those who already feel behind are twice as likely to be contributing less this year than workers who feel they're on track or ahead of where they should be."

Even more troubling, the study found that 31 percent of Generation Z workers saved nothing for retirement over the past two years – something that could be troubling for future savers considering what older generations are now saying about their current retirement savings.

How each generation feels about their current retirement savings.

  • Gen Z (ages 18-25): 30 percent feel behind
  • Millennials (ages 26-41): 46 percent feel behind
  • Gen X (ages 42-57): 65 percent feel behind
  • Baby boomers: (ages 58-76): 71 percent feel behind

So what can you do?

First and foremost, most experts say that saving early is the key. So before you start worrying about how much or where to save, just start! Time is your biggest asset. People who start saving in their 20s are much farther ahead than those who only begin in their 30s or 40s.

Even if you can only afford to save a little bit now, say $300 a month, this still has huge returns over time. Over 30 years, that $ 300-a-month investment compounds to $160,182 at a rate of 2.5% APY. If you only have ten years to save and do so at a higher amount of $1000 a month, you still will only get $136,254 at that same rate. Starting early makes a huge difference. It means you can save a smaller percentage of your income and get a higher return.

HOW MUCH DO I REALLY NEED TO SAVE?

The biggest challenge people face is calculating how much money they'll need to live off of once they retire. So consider these factors when you are thinking about how much to save.

  • Reduced costs – You likely won't need to replace the full amount of income you are currently receiving. If you want to maintain the same standard of living you have now, the number will be closer to 70-80% of your current annual income for each year of retirement.  This is because you have less to pay for during retirement. You'll commute less since there won't be work. You won't need to put 10% away each month for retirement since you are already retired. Other expenses will disappear, too, like home mortgages and caring for children.
  • Retirement age – The age you want to retire is the most significant factor in determining the amount since it means you will have greater or fewer years to pay for. For example, if you want to retire at 65, you could need up to three decades of income. On the other hand, if you want an annual income of $80,000 during retirement, that means you need to save about $2.4 million to ensure you have enough.
  • Additional income sources – Do you plan on working a part-time job? If so, the money you earn can be used to fill the gap in savings for retirement. Another income source is Social Security, although the amount you will receive isn't always easy to predict. The average benefit was $1,550 a month as of October 2022. But keep in mind, this can vary depending on past earnings and the age you start receiving benefits. Generally, higher incomes and later ages receive more monthly income.  You can find more information on benefits and when to obtain them on the Social Security Administration website. 
  • Healthcare costs – As you age, your medical costs will likely rise. Even if you got away with paying little throughout your life, you should plan for future expenses. This is one cost you definitely won't want to be caught off-guard with.
  • Goals and plans – While the rule of thumb is to save 70% of your annual income, this number may be greater if you have big plans. World-travel, home renovations, and dream vacations add up—these costs will need to be included in your estimate if you want to have this kind of retirement experience. 

NUVISION HAS A TEAM OF FINANCIAL ADVISORS HERE TO HELP YOU BUILD YOUR PERSONAL PLAN AND REACH YOUR FINANCIAL GOALS.

Nuvision offers professional retirement planning at no cost to it’s members with it’s partnership with CUSO FINANCIAL SERVICES, L.P. (“CFS”). Work with a financial advisor to complete a MoneyGuide Elite financial plan which will help you figure out your personal goal and how much you will have to save in order to hit your retirement goal. Request your free financial planning appointment next time you visit your local branch or email [email protected] to schedule an appointment with the advisor covering your location. https://nuvisionfederal.com/investments

The information contained within this article is for informational purposes and should not be considered financial advice. Everyone’s financial situations are unique and you should consult a financial advisor for assistance with your particular situation and goals.

 

*Non-deposit investment products and services are offered through CUSO Financial Services, L..P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor.  Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.