Calculating a retirement savings goal is one of the most important steps investors can take to help determine if they are on pace to meet that goal. However, less than half of American workers have tried to figure out how much money they will need to accumulate for retirement and the wide majority of these individuals admit that they either guessed or did their own calculations.* What about you?
What’s important to realize is that the exercise of calculating a retirement savings goal does more than simply provide you with a dollars and cents estimate of how much you’ll need for the future. It also requires you to visualize the specific details of your retirement dreams and to assess whether your current financial plans are realistic, comprehensive, and up-to-date.
The following three strategies will help you do a better job of identifying and pursuing your retirement savings goals.
Double-check your assumptions
Before you do anything else, answer these important questions: When do you plan to retire? How much money will you need each year? Where and when do you plan to get your retirement income? Are your investment expectations in line with the performance potential of the investments you own?
Do you think you could manage to save another $10 or $20 extra each pay period? If so, here’s some motivation to actually do it: Contributing an extra $20 each week to your plan could provide you with an additional $130,237 after 30 years, assuming 8% annual investment returns. At the very least, you should try to contribute at least enough to receive the full amount of Eli Lilly’s matching contribution. They will match 100% of the first 6 percent of your monthly base salary contributed to the plan.
It’s also a good idea to increase contributions annually. You may make an election to have your contribution automatically increased each year. You control the annual increase and set the ultimate goal, and you can change your choices at any time. For example, you can set your contribution rate to increase 1 percent each year until you reach a contribution rate of 15 percent (or other amounts as you may elect). You can sign up for this on the Lilly Benefits Center website. Go to www.resources.hewitt.com/lilly and from the “Savings and Retirement” tab, select “Change Contributions”.
Meet with an advisor
Retirement will likely be one of the biggest expenses in your life. It should not be taken lightly and few people should go it alone. Working with an experienced, independent advisor can be one of the smartest decisions you can make. A financial professional can help you determine a strategy — and help you stick to it.
* - Source: Employee Benefit Research Institute, 2011 Retirement Confidence Survey, March 2011. This is a hypothetical example and is for illustrative and informational purposes only. No specific investments were used in this example. Actual results will vary and are subject to change. Past performance does not guarantee future results.