All those contributions to your 401(k) and IRA, all those hours spent researching investments, all the things you didn't buy because you were saving for retirement. Has it been enough?
Saving for retirement is the No. 1 financial goal of most Americans. Yet, according to the Employee Benefits Research Institute, fewer than half of workers have calculated how much they need to save. The result is that many don't save enough, and find out too late to do much about it.
One way to avoid that is to use one (or a few) of the many retirement calculators available on the Internet. Another is to get a financial professional to help run the numbers. What will they do for you? We asked a group of financial advisors at the Garrett Planning Network that very question: How do you determine whether a client is saving enough for retirement? Here are their responses:
"It starts with a conversation about what retirement means to the client. Doing some visioning. Without knowing what a client wants out of retirement, we can't determine if enough is being saved. For younger clients this is often a general vision; for clients within 10 to 15 years of retirement, it is a necessary first step. Given some goals, the numbers follow. Age, health, family health history, client expectations and goals, legacy wishes all have a part in the discussion and determination of whether enough is being saved."
-- Mary Lacey Gibson, CFP, San Juan Bautista, CA
"First, we need to know what 'retirement' looks like for each particular client. It can range from 'I'm never really going to retire' to a very definite lifestyle change. Once we have a picture of the vision of retirement, we determine what spending level will be needed to support that retirement lifestyle. It may vary through retirement, as the client plans more travel in the early years of retirement. By projecting the value of the resources along with the retirement needs, we find out if there's a gap. If there is a gap, we look at how it might be narrowed through additional savings, by working longer, or by reducing the lifestyle in retirement."
-- Cheryl Krueger, Schaumburg, IL
"Since nailing it is close to impossible, we are left with the task of balancing over-planning and under-planning. Because the consequences of under-planning can be more severe than those associated with over-planning, I like to base a client's recommended savings target on an amount that favors over-planning by about 4 to 1. This tends to result in a good compromise between comfort and confidence, and when events unfold over time and we have more information, the changes necessary to maintain that balance are often minor."
-- Dylan Ross, CFP, East Windsor, NJ
"Without a crystal ball, estimates of needs are the best we can do. If expected income from [Social Security] payments, pension (if available), and savings with a withdrawal rate of 4% or less will cover your living expenses in retirement, you can afford to retire at your chosen date. Otherwise, working longer or working part-time in retirement will be required."
-- Martha Schilling, AAMS, CRPC, ETSC, CSA, Dresher, PA
"Honestly, you'll never truly know until you reach the endpoint (whether the endpoint is the goal you are after, or your own passing). The best that can be done, therefore, is to constantly re-run most likely scenarios, based on what has changed in your life since your financial plan received a check-up. In the end, knowing when you will be able to retire is a moving target, sometimes even when you are already 'retired.' The more important focus should be on living your life while having someone at your back to help catch your plan when it's about to fall."
-- Josh Giminez, EA, ERPA, Columbus, OH
"We break down their retirement goals into needs, wants, and wishes, make them measurable, and prioritize them. A retirement capital needs analysis is then performed to show them if they are on track, what their options are, and what action steps are needed to make their plan successful. A client can then make their own decisions based on solid information. For instance, if all of their needs and wants are met but they don't have enough for that vacation home on the beach, they can then decide if it is important enough to either delay their retirement by a few years or save more to accomplish that goal."
-- Michael Miller, CFP, Mansfield, TX
"I use software and do a series of 'what if' analyses. We look at a range of retirement income needs, a range of ages at which they would like to retire, and a range of expected portfolio returns. One worst-case scenario almost always includes the impact of no Social Security. Although I do not believe Social Security is going away, for higher-net worth clients I do believe there will be some sort of means-testing, and/or the cost of Medicare increases so dramatically that the bulk of the Social Security check goes towards paying those premiums."
-- Katie Birmingham Weigel, CFP, Boston, MA.
Crunch those numbers
So, are you saving enough? If you'd like to do your own analysis, start with the "Am I saving enough? What can I change?" tool among the Fool's retirement calculators. If you'd like some professional help, visit the Locate an Advisor page at the Garrett Planning network website. As fee-only advisors, they'll help you analyze your situation -- but not try to sell you any products. (For a limited time, Fool readers will receive a 10% discount. Just click this link, search your state, and look for The Motley Fool icon to identify participating advisors.)
But whether you hire a pro or run your own numbers -- or hire a pro to confirm your own numbers (nothing wrong with an objective second opinion) -- you must do something, and now is better than later. Because later might be too late.