49% of people not saving for retirement tell us it’s because they don’t know how much they’ll need. Well, here’s a secret: none of us really know. Fortunately, clarity leads to action and there are a few easy steps you can take to understand what you need to do.
Every year, BlackRock surveys over one thousand active defined contribution participants about retirement and their workplace retirement savings plans. Sometimes the survey confirms assumptions we’ve made; other times, it surprises us.
Here is one finding from this year’s survey that does more than surprise me:
46% of participants who are NOT saving for retirement say it is because they do not know how much they will need.
It’s easy to get frustrated with the reasoning here. Clearly, saving something, even if it isn’t enough, is going to be better than saving nothing. But if you think about what these participants are really telling us, it becomes easier to sympathize with them. What they are saying is, not knowing leads to inaction.
In fact, another survey finding, that 77% of participants would increase their savings if they know how much they needed to save, more or less confirms this. Knowledge, in this case, equals motivation.
It’s safe to assume that if you are reading this blog post, you are probably motivated already. But here is something to consider. When it comes to how much we will need in retirement, none of us know. The best we can do is to narrow down the uncertainty and stick to the plan.
Nonetheless, we can all use a little more clarity about our retirement futures. Here are three steps for creating a little more clarity and, possibly, some extra motivation.
Step One: Know where you’re going. What do you want your retirement to be like? The more you can visualize your retirement, the more you can define the concrete steps you need to get there. The Define Your Retirement tool will help create a personal retirement profile.
Step Two: Check where you are. You have a plan – is it working? The Department of Labor has been very focused on helping people understand how their retirement savings translates into retirement income. Their lifetime income calculator is a good starting place to get a sense of whether you are on target.
Step Three: Prepare for landing. If you are between 55 and 64 and starting to get serious about the transition into retirement, the simple to use CoRI tool can estimate how much future income your savings may provide at age 65.
There is always going to be uncertainty about reaching your retirement goals. The key is to not let uncertainty reach the tipping point where it leads to inaction. No single step will ensure complete clarity. But by using the tools linked above or others like them, you can create the confidence to keep moving forward – and maybe save more.