John Brandick was ready to die -- and go out with a bang. When doctors told the 62-year-old Brit that he had less than a year to live, Brandick quit his job, sold all his possessions, and stopped paying his mortgage. Between expensive meals, exotic vacations, and generous gifts to his family and friends, Brandick quickly burned through his retirement savings.
So when doctors discovered that his terminal cancer was actually a benign inflammation of the pancreas, Brandick wasn't sure whether to feel relieved or terrified.
I have some bad news ...
Whether you find Brandick's story amusing or a grim glimpse into the future likely depends on your personal retirement plans. But if you're concerned that your retirement savings aren't up to snuff, you can take comfort in the fact that you're hardly alone. According to the Employee Benefits Research Institute, nearly half of the workforce reported retirement savings of less than $25,000. An alarming 26% of workers age 55 or older have socked away less than $10,000 in their retirement accounts.
To make matters worse, the average retiree can now expect to live longer and pay more in medical expenses than ever before. A 65-year-old man in decent health can expect to live an additional 20 years. During his extended lifetime, he and his wife (who will likely live even longer, by the way) can expect to pay between $300,000 and $550,000 in medical expenses.
So, let's recap: Retirees are living longer, their expenses are skyrocketing, and their retirement savings are woefully inadequate. Suddenly, terminal pancreatic cancer doesn't sound so bad.
OK, terminal cancer still sounds bad
The good news is that it's never too late to save your retirement. While there is no magic "retirement formula," there are a few key steps that every potential retiree should follow.
Step #1: Get a plan
How much money will you need in retirement? How much have you saved so far? When can you afford to stop working? These are but a few of the questions that anyone contemplating retirement must answer.
Step #2: Get the facts
Most retirement experts recommend a withdrawal rate of around 4% of your retirement portfolio each year for living expenses (few-to-no experts advocate Brandick's 100% withdrawal plan). This means if you have saved $500,000 towards retirement, you should expect to live on $20,000 a year. If you can't sustain your current standard of living on $20,000, it's time to get to work.
Step #3: Get started
Do you already take advantage of your employer's 401(k) matching contributions? Have you fully funded a Roth IRA? If you answered in the affirmative, congratulations -- you're already ahead of the pack.
Step #4: Get ahead
Once you've gotten started, it's time to put your portfolio to work by investing in a smart mix of stocks. Consider allocating a portion of your portfolio to large caps with international exposure, such as McDonald's
While your exact allocations will depend on your timeline and risk tolerance, it's absolutely crucial that you invest your retirement savings in quality stocks.
Step #5: Consider some help
The road to retirement is a journey consisting of many steps. If you'd like some company on your journey, click here for a free 30-day trial of our Motley Fool Rule Your Retirement service. Your trial includes full access to all our how-to-guides, special features, back issues, asset allocation guides, and discussion boards, where there is a community of retirement experts on hand to field your questions. There is no obligation to subscribe.
Rich Greifner is eagerly looking forward to living in an active adult community. He does not own shares in any of the securities mentioned in this article. Anheuser-Busch is an Inside Value recommendation. Enterprise Products Partners is an Income Investor selection. Coinstar is a Hidden Gems pick. The Motley Fool's disclosure policy will never retire.