An annual survey released shortly after the collapse of investment bank Bear Stearns earlier this year noted that fewer workers and retirees were confident about saving enough for a comfortable retirement. The drop in confidence measured between the 2007 and 2008 surveys was the greatest decline in the 18-year history of the Employee Benefit Research Institute's Retirement Confidence Survey (RCS).
Along with the decline in confidence, the survey reported that only half of workers surveyed had calculated how much they needed to save for a comfortable retirement. But of those who performed the calculations, nearly half adjusted their retirement goals and close to two-thirds started saving more.
So if worries are mounting over the status of your retirement savings, take a few minutes to figure out how your current situation translates into retirement income. One place to start: the Retirement Income Calculator from BankingMyWay.com.
To begin, enter your age, retirement date, how much you've saved, what you expect to contribute each year and your current tax rate. Next, make a few assumptions, including annual return on investments before and during retirement, as well as tax bracket in retirement.Say you are 50 years old and have saved $250,000 in a tax-advantaged plan such as a 401(k) or IRA. You plan on continuing to contribute $2,500 a year and expect an annual average return of 7% before retirement and a more conservative 5% return during retirement. Your tax rate is currently 25%, but you expect it to drop to 15% in retirement. By the time you retire, you will have saved $756,978, which is enough to provide you with a monthly income of $3,767 for 35 years. (The calculator assumes that you'll live to be 100 years old.)