A lot of us young professionals are probably a bit worried about our retirement. (Wait…I need to be thinking about retirement?) The fears of Social Security going bust or not paying enough to live coupled with the rather generic advice we get, “save 10-15%” makes the situation quite confusing. Should I really be saving 15% for my retirement? 15% would certainly take a bite out of anyone’s budget, much less a young professional’s budget who is burdened down with debt. There aren’t a ton of good visualization tools that I like out there; simply figuring out what you’re retirement account will be after x years with y annual additions at z interest rate just won’t cut it. How much will I need? How much can I expect to have saved? What happens if I increase it to a larger amount? These are very important questions to be answered and I’ve found a great tool that I’d like to share with you: CNN Money’s retirement calculator.

This is a great online tool with helpful visualizations. It allows you to adjust and readjust, all while playing out different scenarios. Well what if I worked an extra two years…or what if I increased my savings amount by another percent? These are all great questions that this tool will help you figure out. Now, it’s certainly not a perfect tool but it certainly gets the point across. When I first took the test, I realized that I wasn’t saving enough, and bumped my retirement contributions from 10% to 12%. I’ve figured out that at this rate, I’ll hopefully be able to retire around 68. That’s a long time from now but at least I know that I will have enough to not only take care of myself and enjoy my ‘golden years’!

Couple of quick thoughts before you have at it…here are a couple things that I really like about it and a couple of things that I don’t:

• Likes
  • It assumes that your salary will both rise with inflation (aka ‘Cost of Living Adjustments’) and that you’ll be getting raises (it does calculate this conservatively)
  • It figures that you’d like to ‘live comfortably’ on 85% of your retiring salary. That means that if you retire making $100K per year, that you’ll be able to enjoy life for the remainder of your time here at $85K per year.
  • It also takes into consideration that you’ll be eligible (assuming it’s still around) for Social Security Benefits.
  • It assumes your money will grow at a 6% return. This is a conservative and relatively safe number.
• Dislikes
  • Doesn’t have an option for us married folks. Although I don’t think we’ll need twice the amount compared to just me, I’d like an estimate of how much we’ll need.
  • It doesn’t take into consideration other investments; like a house or other mutual funds I may be holding. I’m not putting every available dollar that I have into my retirement fund, I’m diversifying by investing in say a house.
  • It doesn’t have a good differentiating factor between saving as a regular 401(k) (pre-tax) vs. a Roth plan (post-tax). I suppose that would be quite tough to model.

Here’s where I am. It appears unfortunately that I’ll need to work until I’m 68. Although I’d really like bumping up my contributions (1% more would allow me to retire one year earlier), 14% (12% me, 2% company match), I just don’t know if that’s possible right now. We’ve got a mortgage to pay and we’re saving for one (maybe two if my Jeep fails!) new car. Give it a whirl; I think it’ll be a real eye opener for you. What’s scary is that this is real life; none of us are able or would want to work until we’re dead. We can’t rely on the government to be there for us, and who knows if our kids will be able to or not. I’m doing what I can now, it certainly hurts watching so much of my money go to my retirement fund, but this calculator shows me that I’ll be able to not only stop working when I get older, but also to enjoy it too!

Once again, here is the link: http://money.cnn.com/calculator/retirement/retirement-need/

Thanks for reading! Check out these other great articles: How should I invest my retirement? or Roth vs 401(k)…what’s the difference?

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