We all know we should probably save more for retirement, but how do you know how much to save? And all those helpful articles in the news and on television about skipping your daily cup of coffee, or cutting other small expenses to create enough financial surplus to invest in retirement savings can be vague, or over-complicated. Here’s an article that recommends a helpful online tool to figure it all out with your own personal numbers, so you can save more for retirement now, to fill in that gap between your fixed income and your needs, later!
Mind the Gap
How many times have your eyes glazed over while reading about the small cuts – three bucks a day on coffee, for example – you can make to brighten your retirement years?
The challenge with such advice is that the how-to is all a bit murky and it’s simply too difficult for most to imagine just how minor spending adjustments can make a difference so far into the future.
A tool developed by Boston College’s Center for Retirement Research, makes the numbers game much more concrete by calculating the gap between your savings and the monthly needs you’ll have during retirement.
That figure of just how much you’ll be short month in and month out can be stark. It may make you ask yourself whether you want to be faced with figuring out how to scrape together an extra $600 or an extra $1,200 every single month during retirement.
That number also can be the motivator, especially if you’re in your 50s, for taking action while time is still on your side.
And once you calculate your monthly shortfall between today’s savings and tomorrow’s needs, Boston College’s other tools, its “Pick Things to Cut” section at http://squaredaway.bc.edu can help you figure out just how to cut expenses to close that gap.
The calculator asks you to check off some possible spending cuts and it illustrates how much closer you’ll get to your goal by making those small lifestyle adjustments.
- Some fairly painless tweaks can yield some impressive savings. For example, find $200 in monthly savings (or a cool $2,400 annually) by:
- Ironing your own clothes instead of using the dry cleaners (Savings: $40)
- Using public transit (Savings: $70)
- Ordering appetizers as meals when eating ($60)
- Buying clothes at the end of the season or sale (Savings $30)
Then, of course, the key is to actually plow those found dollars into long-term savings and leave them alone to work for your future.