Few people feel entirely confident they’re saving enough for retirement.
Why? The numbers can be vague — how long your savings will need to last; your cost of living in retirement; what the stock market will do between now and then. And money is tight, especially as U.S.household debt hits record highs.
These and many other unknowns can combine to make retirement seem a bit like a pipe dream. You can’t resolve all of these issues in a few hours — some, like market volatility, are largely out of your hands — but you can take steps to feel more in control of your goals. Here are three ways to jump-start your retirement savings in one afternoon.
1. Determine your savings target
You kept your calculator from 10th grade algebra, right? It will come in handy — just kidding. Figuring out how much you need to save for retirement sounds much harder than it actually is. It starts with the kind of math you can do on an iPhone: You’re essentially estimating how much you spend today, which gives you an idea of how much you might spend in retirement.
To get started, many people can simply lop off 20% of their current annual income to account for things you won’t have to pay for in retirement, such as payroll taxes, savings contributions and power suits. The remaining 80% is probably pretty close to what you spend on everything else each year. It’s what financial advisors call your “replacement ratio,” and it tells you how much of your preretirement income you’ll need to maintain your lifestyle in retirement.
Then, you need to determine how much you should save to build a nest egg big enough to provide you with that income. To do that, plug your current income, how much of that income you think you’ll need every year in retirement, the amount you’ve already…