How to make your retirement rock

Have you ever wondered if you are going to have to work for the rest of your life? If so, you aren’t alone. Retirement can be a scary time for people. It’s hard to imagine having enough money to be able to quit your job and live off of your hard-earned savings.

Less than half of Americans have crunched the numbers and calculated how much they need to be saving for retirement, according to the Employee Benefits Security Administration.

Remember, financial security doesn’t just magically happen one day. It takes planning, commitment and, of course — money.

The EBSA reports the average American spends more than 20 years in retirement — so here are a few things you can be doing today to make sure you get to live comfortably during those years.

1. Start saving

Make saving for retirement a top priority, even if it seems like that day is never going to get here.  Set a plan and stick to it! Don’t be discouraged if you haven’t started. It’s never too late to start. Start small, if you have to, and increase that amount each month. Ideally you are saving 10 percent or more of your income for retirement.

Contribute to your employer’s retirement plan or your own IRA. If our employer offers one, contribute all you can to your company retirement plan, such as a 401(k). Compound interest and tax deferral can make a huge difference over time in the amount you can save. Make sure you do your research and find out how much you need to contribute to get the maximum contribution from your employer.

If your employer does not have a retirement savings plan, you can contribute to your own individual retirement account (IRA). Although you will not get any matching contributions from your employer, you still get the tax advantages and long-term growth.

2. Research your Social Security benefits

Social Security pays you roughly 30 to 40 percent of what you earned before retirement. You can estimate your benefits here.

3. Know how much you will need to save

It’s more expensive to retire than people think. The key is to plan ahead.

Experts estimate you’ll need between 70 to 90 percent of your preretirement earnings to maintain your standard of living when you quit work. To get a general idea of how much you will need to have in savings, follow this simple formula:

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Start with Income Needed (70 to 90 percent of current income – 70 percent if you want to calculate the low side, 90 percent if you want to calculate the high side).

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Subtract your Social Security Retirement Benefit and any pension or other income you will receive each month.

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This equals your net monthly savings withdrawal: the amount you will have to take out of your retirement savings each month.

To know how much you need to have saved, times your net monthly savings withdrawal by 300. For example, Say you needed $2,000 per month in addition to your Social Security, pension, and any other income you plan to receive each month. $2,000 X 300 = $600,000.

4. Keep your hands off your retirement funds

As your retirement savings grow, it may be tempting to tap into those savings by taking money out of your plan or borrowing against your 401(k). Eliminating payments by paying off debt or buying something that you want or even need may seem like a good idea, but don’t ever touch you retirement savings to do it. In addition to the potential taxes and penalties, the loss in long-term growth will have a significant impact on your retirement.

5. Get educated, and don’t be afraid to ask questions.

Do your homework and talk to your financial adviser. Ask lots of questions and make sure you understand the answers. There is a lot of research online or check out your local library for some extra reading on how to retire successfully. Visit the EBSA’s website at dol.gov/ebsa to view an array of retirement publications. Planning for retirement isn’t easy, but if you act now, you can make sure you’ll be able to retire comfortably.