# Calculator Helps Determine How Much Savings You'll Need at Retirement

By Michelle Singletary
Thursday, February 10, 2005; Page E03

Every other week, I host an online discussion at washingtonpost.com. I love these live chats because they give me a chance to hear from regular folks about their real financial issues.

Recently, my online guest was Jennifer Openshaw, chief executive of FamilyFN and author of "Quick & Easy Budget Kit." She and I took questions about budgeting. As always, there were a lot of leftover questions. So here are our answers to some of them.

 _____Column Archive_____ • Withholding on Social Security (The Washington Post, Feb 6, 2005) • Mistakes in Deeding Property to Children Are Hard to Reverse (The Washington Post, Feb 3, 2005) • Read Michelle's Past Columns

I already put 10 percent of my pretax income into a 401(k) retirement plan. Is that enough for retirement? I'm only 29.

Jennifer: How much you need for retirement depends on several important factors, such as: what you already have saved, how long you work until full retirement and how long you expect to be in retirement. Many, many people are vastly underprepared. Your 401(k) is the first place you want to max out on, but then you probably want to save beyond that.

Michelle: If you don't have a clue how much you may need for retirement, use the Ballpark Estimate Retirement Planning Worksheet at www.choosetosave.org. This is an easy-to-use calculator that takes into account your savings, any pension income you may get and your projected Social Security benefits (under the current system). The worksheet assumes you'll need 70 percent of your current income, that you'll live to age 87 and that you'll realize a constant real rate of return of 3 percent after inflation. What you get after plugging in your personal information is a rough estimate of what you will need at retirement. I tell you, it's an eye-opener to see that figure.

I'm already saving 10 percent of my income, and it takes a big chunk of my money. Do I then put away another 10 percent of my salary into savings (in case I'm fired, etc.)?

Michelle: I always think that inherent in this question is this thought: What am I working for if all my money has to go into a savings account? People have the wrong attitude about saving. That's why it's important to budget. You save for what you want. That's what you are working for. We've got it all backward in this credit-card-crazy nation. The way most of us budget is that we get what we want before we have the money to pay for it. That means a lot of people are actually working to get out of a deficit situation. They are working to increase the profits of the credit card companies. Depending on your personal needs and wants, you may in fact need to save 10 percent or 15 percent or even 20 percent of your income to meet your goals of a down payment on a house, a vacation every year, a big-screen television set, etc. In other words, we should all be asking ourselves, "How much do I have left over for expenses after I save?"

How important do you think it is to balance your checkbook? I use my bank's online bill-pay service. I also keep track of my balance online. What's the point of spending all the time and hassle to balance my checkbook? (I haven't in years and so far so good.)

Jennifer: It's not so important if you monitor your account regularly online. That way, you can see what's coming in and going out. But the checks listed won't tell you what they're for, whereas your checkbook will. The goal with balancing your checkbook is simply to make sure that you know where your money is going, and you avoid writing a bounced check.

I was never taught how to do a budget. I have attempted to do a budget numerous times and I don't think I have been successful because I always seem to find myself in a financial bind. Part of my problem is discipline, but I want to know how to start a budget and what are the necessary components?