💰 Do you have enough money for retirement?

🌴 Saving requires a bit of willpower

💰 Follow these tips from one NJ financial expert


Nearly 57% of Americans in the workforce say they are behind where they should be with their retirement savings, while 22% say they are right on track with their retirement savings, and 15% say they are ahead of where they should be, according to a new Bankrate survey.

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Why do people feel behind in their retirement savings?

Ken Kamen, managing director at CW Advisors Group in Hamilton, said people are trying to gauge on how they’re going to feel in the future based on how they are feeling today. People often straight-line their spending of what they’re spending today the way they’re going to spend in the future.

However, the main reason why he believes people feel behind is due to inflation, which this nation has not seen in decades. People are used to not seeing that sticker shock. So, now they’re wondering if they’ll have enough money for the future. This is the beginning of their anxiety as they realize that inflation is real, he said.

Older New Jerseyans are familiar with inflation, having gone through it in the 1970s and 1980s, so it’s not a new concept. Due to that fear of inflation, many probably already saved more money.

People often feel behind because they experience a tug-of-war on current spending. Kamen said many times they feel guilty about going out when they shouldn’t. Going out each night or spending frivolously on things reminds people that they’re not saving money for the future.

Many New Jerseyans in a recent AAA survey are concerned about saving for retirement. (Jupiterimages, ThinkStock)
Many New Jerseyans in a recent AAA survey are concerned about saving for retirement. (Jupiterimages, ThinkStock)
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How can I catch up?

If you feel behind on retirement savings and you want to play catch-up, Kamen suggests people simply don’t spend that much.

Scale back on going out, or stay out of high-end restaurants, because if you don’t cut back now, you’ll never be able to go to a fancy, expensive restaurant in the future.
If you can save 10% of your income in a 401K or another plan, that’s great, Kamen said. If your company offers a 401K with matching, at minimum, you should find a way to get the company’s maximum match.

For example, if a company will match 50% of the first $6,000 a person picks in, find a way to put $6,000 in because the company is going to give a person $3,000 which is going to grow tax-free, an amazing rate of return.

“You’re not going to get that risk-free rate of return anywhere else,” Kamen said.
Another way to catch up on retirement savings is to remind yourself that every time you get a raise, that raise is not 100% for you. It’s 50% for you now and 50% for the future you, Kamen said. That will get you into the habit of saving.

For those who don’t save, Kamen said it doesn’t matter what you save. Have $10 a week taken out of your paycheck and put that money in a savings account, a 401K, or someplace else. If it’s automatically taken out of your paycheck, you won’t even miss it, he said.

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Saving $1 million

The Bankrate survey also found that 35% of workers think they will need more than $1 million to retire and live comfortably.

Is that enough? Kamen said whatever your savings are, you typically expect them to last decades if you keep them invested in a balanced portfolio of stocks and bonds.
It’s reasonable to expect that if you take out 4% a year, that portfolio should last for decades, Kamen said.

“But looking at a million dollars, a good framework is to say, ‘alright if I have a million dollars, I could realistically live off of $40,000 a year from that, and then start building up from there,” Kamen said.

Many people may not think that a million dollars is enough to take someone into future retirement with inflation.

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“So, then you have to start layering in; I can continue to work, I’m going to have social security, is there an inheritance potentially in my future?’ What you need to do is use that as the building block to start thinking about things that will add on to it to create annual income for you,” Kamen said.

That’s because people are trying to live off income and not savings. After all, savings are the nest eggs for the future.

Start constructing in your mind potential sources of income. This will provide a wake-up call to make you realize that if you only have half a million, you can’t live on $20,000 (taking out 4% a year). The need to add more money becomes much more crucial.

New Jersey is one of the most expensive places to live, Kamen reminded. He said in all the years he’s been working, he’s found that most people will make their money in New Jersey because it’s a high-income state.

But they will retire in the South or Midwest because the cost of living is substantially lower and the dollar stretches further.

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Advice for Younger Workers

Money doubles every 7 years on a 10% rate of return. The power of compound interest rate which leaves money growing on its own is probably the greatest miracle of finance, Kamen said. It’s only afforded to young people because older people don’t have the luxury of time to allow their money to grow.

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