The retirement age for those born in 1960 or later is 67. Depending on the type of lifestyle you want to maintain, you might need to be a millionaire to stop working in your mid- to late 60s.
Try Nerd Wallet’s retirement calculator to see how much of a nest egg you will need to retire.
Nerd Wallet's retirement calculator shows what your nest egg needs to be in today's dollars. It takes into account inflation, a 2% salary increase and investment gains. To get an amount, you type in your age, income and savings information.
We asked locals how much they think they needed in savings.
“Probably more than I’m saving right now,” said Kate Halfwassen. “I really have no idea. A lot of money."
Halfwassen plugged in her data into the retirement calculator.
“It tells me that I need $2.6 million to retire,” she said laughing in disbelief.
Her friend joining her for lunch also tried it out.
“It said I need $4.85 million,” she said. “It can't be right!”
Professor of Economics at Carthage College Yuri Maltsev realizes for the majority, those numbers can seem out of reach.
“If you can save a million, then save a million. The more you save the better you are,” Maltsev said. “It's not realistic for me, but for other people maybe it is."
On that retirement calculator, you can factor in social security benefits, but Maltsev says younger generations can't bank on it.
“Anything which is the government is very difficult to rely upon,” he said.
Financial planner Tony Drake with Drake and Associates shares five tips to help you start saving for your retirement:
1.) Take advantage of free money
“It can be difficult to save for retirement while dealing with student loan debt, credit card debt or other expenses," said Drake. "However, many employers offer a retirement savings plan, like a 401(k), and will match a certain percentage of your contributions. This is free money for your future! Contribute at least enough to your employer-sponsored retirement plan to get your full match."
“Make sure you are contributing enough to your 401(k) or other employer-sponsored retirement plans to get your employer's match. Matching formulas vary, and it's important you understand how yours works so you don't leave free money on the table."
2.) Make it automatic
“Automate your contributions to your savings account, 401(k) or other retirement accounts. I recommend saving 10-15% of every paycheck. If you can't save that much just yet, save at least enough to get your employer's match, and set up automatic increases annually or with each raise. An increase of 1-2% will not be very noticeable from your paycheck, but it can make a big difference in your account balance over time."
“Consider setting up a monthly automatic transfer from your checking account into your savings. This extra money will help you build your emergency fund. Your emergency fund should have enough cash to cover up to six months' worth of expenses. This easy-to-access cash will help pay for an unexpected car repair, home repair or medical bill."
3.) Max out your savings
“One thing some of the best retirement savers have in common is that saving is a habit. They have a healthy savings rate, and they understand the importance of saving early and saving often.
Once you turn 50, I recommend taking a look at the balance of each of your retirement accounts. Calculate how much income each account will provide versus how much income you'll need in retirement. If the numbers aren't matching up, get serious about maxing out your contributions and taking advantage of catch-up contributions. If you're 50 or older, you can save up to $26,000 in your 401(k) and up to $7,000 in your IRA this year.”
4.) Utilize tax-advantaged accounts
“If you’re saving for retirement in a 401(k) or traditional IRA, those accounts are tax-deferred. Your money goes in pre-tax and you pay taxes when the money is taken out. Retirement savers who utilize a Roth 401(k) or Roth IRA deposit money they have already paid taxes on. That money grows tax-free and is taken out tax-free. The savviest retirement savers are utilizing one or both of these savings tools.”
“Saving for retirement is about more than just the amount of money you put away. It's also important to have a plan for your money and a strategy that will help you reach your goals. That starts with understanding how retirement accounts work. If you are saving strictly in tax-deferred accounts, you must understand that Uncle Sam will be getting a cut of your savings when it comes time to take that money out in retirement. consult your financial adviser to determine how to utilize tax-advantaged accounts.”
5.) Ask for help
“When you are younger, your goal is wealth accumulation. Once you hit your 50s, you need to shift toward wealth preservation. A financial adviser can help you through each decade of life. This person can help you set savings goals, create a comprehensive plan to meet those goals and adjust your plan as you get older and closer to retirement. Find someone you can trust who will hold you accountable to your plan."