We’ve all been faced with the situation; do I commit to saving more for my retirement by increasing my contribution or do I enjoy the fruits of my labor today?
Just yesterday I asked myself that question when I noticed that my contributions to my 401(K) were going to fall $1,500 short of my allowable maximum for the year. This is the first year I am eligible for the $6,000 catch-up contribution and I thought I had changed my contribution percentage to meet the maximum of $24,500. When I went to correct the contribution percentage online so that I was at the threshold for the rest of the year, I paused to think about where I could pull the extra $112.00 per paycheck from my budget.
Saving by definition is delaying current consumption for future consumption, but how do you know if you’re striking the correct balance? How do you know if your on track? Where is the extra money needed for retirement going to come from?
According to a study by Northwestern Mutual, I am not alone in questioning if I’m doing enough now to reach my retirement goals. 78% of people surveyed for the study said they were less than confident about having the right balance between spending and saving for later. (Source: Northwestern Mutual 2018 Planning & Progress Study)
I’m a financial planner, so I know how much I need when I retire to live the lifestyle I want. Working backwards using our planning software, I know how much I need to be saving each year to reach that number. What I don’t know, and what most people don’t know is, am I saving too much for retirement and not enjoying enough of my money now?
The answer, of course, is different for every person. With the continued shift toward defined contribution plans, future retirees are being asked to take on more responsibility for their retirement outcomes than in the past. So the question is of vital importance.
We can help you determine how you can arrive at a reasonable estimate of what you will need in retirement and how much you need to currently save. If you have any further questions or would like to discuss your situation with us, please contact us at: firstname.lastname@example.org or (602) 595-2324.