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| Uncommon Sense | Zen and the art of retirement planning
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Lots of smart people are paralyzed when it comes to planning for retirement. Let us take a deep, cleansing breath, visualize and talk about cash flow, O Unenlightened One.
By MP Dunleavey
Editor's note: Columnist M.P. Dunleavey and six other women have come together online to strip away the myths surrounding money, lay bare their assets and liberate themselves from debt. Follow the quest for financial fabulousness of these "Women in Red" every second Monday in Dunleavey's column on MSN Money.
Its time to talk about retirement -- everyones faaaaaavorite topic.
Now lets be honest. Its not retiring thats so scary, its how much you need to save in order to get there. Or rather, how much you havent saved.
I dont feel like Im making enough to get by, much less save for retirement, says Brice, 36, who has about $6,000 in her SEP IRA. And, being a free-lancer, its not like I can rely on a company pension or 401(k) -- so how am I supposed to deal with it all?
Sadly, its not just the free-lancers (i.e., Brice, Yalitza and I) who feel this way. The same anxieties about the future cause even people with well-endowed 401(k)s to grind their teeth at night.
A universal angst
Will the amount Im saving be enough?
How much is enough?
Even if I think its enough now, will it really be enough then? Even the most retirement-secure member of our Women in Red group, Beth, is worried. At age 38, she has close to $50,000 in retirement savings! Plus, her government job allows her to sock away 14% (which shes doing), and then matches 5% of that. Plus, her in-laws gave her daughter a college fund account when she was born. Plus, her husband is an architect. My $5,500 IRA and I hate her.
But the truth is, like most of us, shes never sat down to figure out what her nest egg would yield in future dollars, nor has she estimated what she and her husband will need in 30-odd years. Its a combination of fear and laziness, she admits, putting her finger squarely on the evil duo that keeps many of us paralyzed and clueless.
Stir in the destructive belief that the future will take care of itself, and no wonder so many people dont have a grip on retirement. I didnt think about the future until recently, admits Yalitza, 33, who hasnt started saving for retirement. I spent my 20s living paycheck to paycheck.
More Women in Red on MSN Money
Don't try this at home
Fortunately the Internet abounds with retirement calculators. And most of them suck. If you must try one, keep in mind:
- The number of variables that go into each individuals retirement situation are impossible to capture in one crude online tool. At best, these so-called calculators give you a ballpark figure based on little more than your current salary, current savings, X rate of return, the age at which you hope to retire, how many years you expect to be in retirement (thats code for before you die) -- and a dollop of Social Security.
- That ballpark figure you get is so terrifying that to face it alone, with nothing but your computer to hear you cry, is not worth the heart attack.
For example, Brice and I were forced out of our paralysis by my deadline. She test-drove one online calculator; I tried two.
She used the one on MSNBC and was told that, to retire on her current income of about $50,000 a year, she would need $744,000 in savings -- which would be worth $3 million in future dollars. And in order to get there, shed have to save about $6,000 a month.
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