Do you know how much to save for retirement?
When my eyesight began to give me trouble, I tried to ignore it.
"Nope, not getting glasses," I told myself even after the headaches had started, a result of my straining to read.
Finally, I got my eyes checked and, as a result, I bought reading glasses. Now I can see clearly.
What I went through with my eyes is a bit like what many workers do when it comes to retirement planning: They try to ignore the inevitable.
The Employee Benefit Research Institute (EBRI) released its 2010 Retirement Confidence Survey and, among other things, the organization found that many workers continue to be unaware of how much they need to save for retirement. Less than half (46 percent) reported that they had tried to calculate how much money they will need to live comfortably in retirement.
"The sooner people realize where they are, the easier it is to correct it going forward," said Jack VanDerhei, EBRI research director and co-author of the survey. "For example, if you're age 40 and find out you have a retirement funding gap of thousands of dollars, obviously it requires a smaller savings per year than if you wait until you're 45 or 50."
Given the current economy, it's not surprising that fewer workers said they have been saving for retirement (69 percent, down from 75 percent in 2009). An increased percentage of respondents said they have nearly no savings or investments: 27 percent said they had less than $1,000 stored away. More than half (54 percent) noted that the total value of their household's savings and investments, not including the value of their primary home or any defined benefit plans, is less than $25,000.
So how much should you be saving for retirement?
Instead of doing a methodical calculation, many people just guess.
In the EBRI survey, 29 percent of workers said they needed to save less than $250,000, while 17 percent said their goal was between $250,000 and $499,999. Twenty-four percent of respondents think they should save $500,000 to $999,999. Eight percent think they need to save between $1 million and $1.49 million, and 9 percent said they needed $1.5 million or more. Thirteen percent didn't even want to take a guess.
Here's something to ponder: Workers who have done a retirement-needs calculation are likelier to feel confident that they'll have enough saved. Finding out what they need also has the tendency to change people's retirement planning behavior, EBRI found.
In fact, workers surveyed for the 2008 report who had done a retirement calculation said they made some changes. Most began saving or investing more. Other actions included: