Weekend Economists: See the Kittehs! May24-27, 2013

[Demeter]

90. How to know if you have enough to retire

RULE OF THUMB (TOM THUMB)IF YOU HAVE TO ASK, YOU CAN'T AFFORD IT!

http://www.marketwatch.com/story/how-to-know-if-you-have-enough-to-retire-2013-05-25-1710307?siteid=YAHOOB

Odds are high that you haven’t saved enough money to retire in the manner in which you desire. That’s the bad news. The good news is that you can easily gauge just how close or far away you might be. And the first to thing to check is how much you have set aside for retirement.

The average so-called full-career worker at a large employer needs to have 11 times their pay, after Social Security, set aside at age 65 in their retirement nest egg to expect to have sufficient assets to get through retirement.

Or least so says research conducted by Aon Hewitt, which has been studying whether workers at large firms will have the financial resources to meet their post-retirement needs since 2008. Including Social Security, you will need 15.9 times pay to maintain your standard of living throughout your retirement years.

According to Aon Hewitt’s Real Deal 2012 Retirement Income Adequacy at Large Companies study, workers who have 11 times pay set aside when combined with Social Security will be able to replace in year one of retirement 85% of their pre-retirement income. Read that research. The 85% rule of thumb reflects one’s final salary, adjusted for decreased savings and taxes, increasing medical costs and changing expenditures in general, and inflation.

Of course, there are some adjustments that must be made to this rule of thumb based on your income. (We’ll talk more about that in a second.) But in essence, one quick way to determine if you’re on track to having enough money for retirement is to divide your assets earmarked for retirement by your salary....