Whether you are in the beginning or late stages of your career, saving for retirement is something that you should always be working toward. Having enough money saved at the end of your career is crucial to both surviving and enjoying your post-career life.
David Gottlieb, investment adviser at Edward Jones in Pepper Pike; Marla Petti, senior wealth adviser at MAI Capital Management in Beachwood; and Elizabeth Scheiderer, senior financial adviser at NCA Financial Planners in Pepper Pike, said everybody’s retirement plan will look different, depending on a variety of factors.
Gottlieb said it is important to set reasonable expectations at first in terms of a target amount to reach.
“You can’t put a number – when you’re starting – to try to figure out where you’re going to finish,” Gottlieb said. “Psychologically, if you give someone a big number, they won’t save because the number is too big. What I tell people is it all depends on people’s lifestyle and how they live. Everyone’s a little bit different. Some people can retire with a small amount, and they’re happy as can be. Some people need a lot more money, just because they have high demands and high bills. It’s really going to be based on an individual’s lifestyle more than anything.”
Scheiderer said the amount of money someone should have saved depends on a few components, including how much you want to be spending in retirement and if you will have any other sources of income in retirement.
“If you have a pension, for example, or a rental property that can supplement your income, then you may need less investments actually saved,” Scheiderer said. “Do you want to retire with the same standard of living you had while you were working? Many people do, and they want to be able to take the same vacations and live the same life they have. If that’s the case, then the amount you need to save is a little bit higher.”
No matter how much money you should have saved, Petti said that it is important to begin saving as soon as possible.
“The earlier a person starts, the better, due to the effects of compounding,” Petti said. “Your lifestyle, life expectancy and goals will have a large impact on how much is ultimately needed. It is important to have an emergency fund too, so saving what you can afford is very important early on. Keep in mind it is never too late to start saving.”
Petti added, “The biggest mistake is waiting until you are ready to retire to determine whether you have saved enough. The earlier you start planning, the more time there will be to make any needed adjustments, like increasing the amount of savings or adjusting the asset allocation of their portfolio.”
Scheiderer said that it is also important to adjust for inflation when planning for the future, as opposed to setting a goal on a fixed number.
“You have this idea of what you’re going to need when you’re 65 years old,” Scheiderer said. “But you have to remember there’s inflation; that dollar amount will go up over time. Unless you have enough saved and invested appropriately, you’re not going to be able to keep up with inflation.”
According to the U.S. Census Bureau’s American Community Survey from 2019, the average retirement age in Ohio was 63 years old. However, Gottlieb recommends to his clients that they should set a retirement goal for 55 in order to put them in a good financial state.
“You want to make sure you’re saving, and you have enough savings at age 55 that you could potentially retire if you wanted to,” Gottlieb said. “But you don’t have to. It takes the stress off of people when they have a lot more saved up at an earlier age. You won’t worry as much about trying to last five years of working to have enough money to retire.”
Publisher’s note: David Gottlieb is a member of the Cleveland Jewish News Foundation Board of Directors.