Make retirement savings a need

Retirement is a large, long-term savings goal. If you calculate your basic needs in retirement at $30,000 per year, for 20 years of retirement, that’s $600,000 that you will need by the time you stop working. You may need more to sustain your lifestyle.

The need for those funds may not be immediate, but the math involved in saving and investing throughout your life to reach that final amount makes retirement savings an immediate need.

Here are a few tips to get you started.

Set an initial savings goal. Let’s do a simple calculation. How much are you making now per year? Do you think that annual amount will cover your basic needs in retirement? If you do, multiply your annual salary by 20 years, to last you from retirement at 65 through age 85.

If the annual amount will not cover your basic needs, adjust upward. You also can set a higher number of years. This calculation is your initial retirement goal, and it can be a useful ballpark amount to begin with.

For a more accurate figure, you can make estimates based on categories in your monthly budget, talk to people who are closer to retirement age, find resources online, or talk to a financial adviser.

One potential drawback in this estimation is inflation, or the rising cost of goods and services. In the U.S., $10 in 1981 had the same purchasing power as $24.75 had last year. This makes it all the more important to save as much as you can, as early as you can, and to invest strategically.

Start saving each month. Try to think of retirement savings as a habit. If you encourage yourself to consider retirement as an automatic, consistent need on your monthly budget, you increase the chances of reaching your goal.

First, add “retirement” as a line item to your personal budget. Even if you can’t contribute anything now, leave it there. It can serve as a reminder for the goal you have to fulfill.

Try to divert what you can spare to your retirement contribution. Identify any spending areas in your personal budget that you can cut. Make gradual, sustainable budget cuts, so that you can stick to your new budget and steadily build your savings habits.

Find your target monthly retirement savings. Once you’re diverting what you can toward retirement, it’s time to figure out how much you should aim to save each month, to meet your retirement goals.

Online resources can be extremely useful here. Simply enter “retirement calculator” into your preferred search engine, and a number of options appear that can help you calculate what you need. Bloomberg’s retirement calculator allows you to quickly figure out your ideal annual contribution based on your total retirement fund target.

Let’s say that you start retirement savings at the age of 35, and predict a 7 percent average annual rate of return. You want to retire at 65, with a final goal of $600,000. You will need to save $529.32 each month to reach that goal.

When you start 10 years earlier, that monthly contribution falls to $250.46.

Once you have initial figures, keep looking into retirement resources. Sustained savings and a good understanding of retirement will help you reach your goals.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at

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