Am I Behind On Retirement Savings? How To Calculate Your Number

0:06Welcome to the Wealthy After 40 podcast, the show for Gen X women and couples who are ready to ditch financial stress and feel confident about retirement. I'm your host, Dailene Higgins, money coach and retirement strategist to help you gain clarity and confidence with your money by creating a spending plan that aligns with your financial goals and dreams so you can spend intentionally, save consistently, and feel at peace about your future. Join me every week to understand your money, simplify your decisions, and take intentional steps toward the life you want.

0:48You've just realized retirement isn't that far off, and now you're asking if it's too late to start your retirement planning at 40. By the end of this episode, you'll know how to figure out where you are in the retirement planning process and the next step you should take. So you've been busy with your career, kids, right? It's midlife. We bought a house, sold a house. Life has just been happening. And now as you're getting to the stage where you might have one or two left in the household, you're realizing, ah, we're heading to our empty nest years. Oh man. Do you know what the next milestone is after that?

1:35Retirement. So then your mind kind of starts spiraling in a sense. And you're like, retirement, have I done enough? Have I done the right things? And then you ask, is it too late? So asking that question, you go to Google, You ask Google, is it too late? You read some blogs. You listen to some podcasts. May have been how you found me. Welcome. Glad you're here. And then in the midst, you see a few retirement calculators. And you're like, okay, I'm going to give those a go. This will answer my question. This is my client. She, on the call, before she joined my retirement strategy session, she says I did one of those retirement calculators it says I need four million I don't I'm never going to make it she's in this panic and I said hold on a minute do you know how it was calculated to that four million she's I don't it just said I needed four million and I said I'm not sure what those inputs were as a number person I'm always like what was it feeding I'm not saying that four million wasn't correct by that calculator, but we don't know the inputs.

2:50So I said, let me help you walk through this real quickly. We'll calculate how much you need. And it was nearly half of that amount. And I said, I know this amount is correct because I know the inputs. Again, we're estimating and projecting those amounts. But I said, you don't need that much more. So she jumped into my retirement strategy session, so we could dial in to really get a true number. So the first step, if you're like, just getting to this subject, you're like, I am I behind? Am I too late? I don't know what to do. Your first step, you must get clear on where you're at in the retirement process, okay?

3:39The path. You have where you're starting from and you're not starting from zero because you've been working for a while. Hopefully you've had some employer matches that you've been taking advantage of. You've worked several jobs that have had a 401. Right? So you need to get clear on what do those amounts say I'm going to have if we project them underestimating what the market's going to return? And then how much am I going to need? That's what is very important. And that helps identify your gap. It's not a, oh, you're behind. Oh, you're too late. It just says, this is how much more you need. Now, I don't love when it says, how much do I need to have saved by 40?

4:30How much do I need to have saved by 50? I don't know. I don't know how much you make. I don't know how much you spend. These are the things with those, I just want a number. You need a number that is made up of your numbers. Retirement savings is just as personal finances such as budgeting. Your budget does not look like somebody else's. Your spending does not look like somebody else's. Therefore, your retirement savings and the total you need is not a standard by the age of 40, 50, or 60. There's many different things that feed into that, but there is a very simple way to get you even to that first step, even to like, okay how much do I need?

5:23Again for me it's all about personalization. It's all about who are you, what are you doing with your money, and how does that translate to retirement. So I'm going to walk you through the same calculation that I walked my client through that I just shared about earlier. It's called the rule of 25. Everyone's like where's this rule? If you search the FIRE community, which means financial independence retire early, they've been using this calculation for years. And this is so that individuals can retire at the age of 35 or 40. So they have put it to the test. You don't need some fancy software.

6:08You don't need some fancy calculator. And even if you do get that calculator, does it tell you what to do next? next. That's the important thing. Okay, I'm learning something, but then how do I know what to do next? So rule of 25. I'm going to walk you through this. So if you need to come back and listen to this, get out a piece of paper. It's not difficult. There's just three numbers that we need. Okay. You need to know how much you are spending every month. I use current expenses if you're still 15 years out. We can project a little bit for retirement, but it's easier to say the way I spend is the way I'm going to spend in retirement.

6:55Using your current expenses, I want to maintain my lifestyle. Use your current expenses. So get clear on how much you're spending every single month. That's your expenses. And in those expenses, you need bills, you need your spending, and you need the savings amount for your sinking funds. At a minimum, those are the three categories that you need to create a solid number for you for right now. Step one, I want you to know this is my first effort. Even if it's your third or fourth, this is just my effort. That is what I want you to have. Okay, so you have a monthly amount. I want you to multiply that by 12.

7:42Essentially what that is doing is saying this is what I spend in a year. So an annual expense, I don't know, you might be at$90 ,000, you might be at$120 ,000, you might be at$200 ,000. I don't know what you make. I don't know what you spend. But that's not what matters. You have your current expenses multiplying up by 12. So you now have an annual expense. From that, you're going to multiply by 25, the rule of 25, and this is going to give you your 1 million, your 1.4, your 1.7. This is how much you need to have saved so you can retire. The rule of 25 ultimately means that you can withdraw 4 % safely to live on and not run out of money.

8:41So this gets you one step closer to retirement. The next step would to be how much is my savings going to grow to in that same time period? So that's your next step. Investor.gov has a compound calculator that will walk you through that. I can also walk you through that on a free call. Again, to support you in figuring out that number. That's your next step. So a different client than the one I talked about earlier has been going this process from her retirement strategy session to working with me for four months, calculating her retirement quote gap. We're estimating, we're projecting. I want to talk about that for just a quick second.

9:33Budgets are estimated. What we're saving, we're projecting is estimated. And this is something, this is the reason why I have my clients do it every 90 days to take into consideration actual market change and actual spending change. There's these things that we have to keep refining and doing and growing. And so she had done this and at her four-month mark, we went back after we had done all the work and we'd done this initially in her strategy session. We went back, we recalculated, again, we do this every 90 days. Her gap was$20 ,000 dollars. From her estimated spending or what she's going to need to her projected savings, she was$20 ,000 shy.

10:27What this meant, what this means is that she can either dream bigger, put more expenses in there. She doesn't need to technically add another dollar to retirement contributions. And so she can focus on what she has been putting off for the here and now. For the next five to 10 years, there are some projects she wants to do. She can easily step in and do that. But knowing where you're at every 90 days is going to support you in many ways. First off, you're going to know where you're at. Secondly, you're going to know what the progress truly looks like and that you are progressing so that you can recognize like her if you need to make a bigger shift.

11:16I get to dream bigger. I don't need to not spend or you know what? I'm going to hold off on increasing my retirement saving contributions because my client is getting raises every single year, which also includes employer match. So that's going to add to it. see what that's going to happen. And then what the market truly does, because we under project that just the way I've been doing budgets for years, and estimates for years, I love to underestimate. So when you get the actual progress back in there in 90 days, you can see, oh, man, what I am doing is working. And like my client, make this beautiful shift to I either get to dream bigger, or we could do a lot of things sooner.

12:07So what I want you to actually take away from this episode is that it's not too late, but you need to know where you are at in the planning path. You need to know where I'm at between how much do I need and how much will I have saved. So if you're stuck asking yourself and maybe others, you're reaching out for that help, if it's too late to save for retirement, I want you to book a call at elevatefinances.us backslash call to see if the retirement strategy session is the best next step for you. We're going to spend 30 minutes determining where you are in that retirement planning process and what the next money move is to get you moving forward.

12:59That's all you need to do. That's it for this one. We'll see you next week.

13:07Thank you for spending this time with me. If you're not already following the show, be sure to hit subscribe so you don't miss what's coming next. And I'd love to stay connected with you between episodes. So come join me inside my Facebook community, Retirement Ready Hub for Gen Xers. It's where we're having real conversations about money, sharing wins, working through challenges and building a clear path toward retirement. And remember, retirement isn't just a dream, it's a plan and you get to make it possible.