25 October 2020
Tony Giordano
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Are You Confident You're Saving Enough For Retirement?
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Most of us (myself included!) don’t plan to work forever, so this questionis always looming. Here’s some insight on how other pre-retirees answer. 

Our informal survey 

In a casual on-the-street “interview” in West Chester, PA, longtimeVanguard crew member Sue Ianieri asked 15 people a few questions aboutinvesting, including whether they’re confident they’re saving enough forretirement.

A national survey 

A recent online study,* which had a significantly larger sample size, foundthat only one-third of retirees are confident in their ability to livecomfortably throughout retirement.

I have a few theories to explain the discrepancy between our survey resultsand the results of the online survey: Maybe people didn’t want toadmit—especially on camera!—that their retirement savings aren’t adequate. Ormaybe we encountered a unique sample of optimistic investors who always see theglass half-full. In any case, it’s a fact that many investors aren’t confidentthey’re saving enough for retirement.

Here are a few factors that may contribute to feeling uncertain about thehealth of your retirement savings. Although some of them are outside of yourcontrol, you don’t have to let them get in your way.

1. Future unknowns 

Fact: None of us knows what the future holds for Social Security andMedicare (or how much we’ll need to spend on health care throughoutretirement). In fact, only 7% of the respondents in the online survey feltconfident that Social Security and Medicare would continue to provide the samelevel of benefits they do today. The unavoidable ambiguity around the futurestate of these “guaranteed” benefits can dampen even the best saver’s confidence.

My recommendation: Base your retirement savings goal on the information youknow today. Just keep in mind that you may want to be conservative to create abuffer for the unknowns.

Income from various sources, including pensions, annuities, part-time employment,or rental properties may be able to fill in any gap between the guaranteedbenefits you anticipate based on today’s programs and the guaranteed benefitsyou’ll actually collect in retirement. Aligning your retirement goalswith available resources can help you see the big picture so you don’t losesleep worrying about future unknowns. (For more information about creating aframework for retirement spending, read this blog post by my colleague Colleen Jaconetti.)

2. Assets can fluctuate in value 

Fact: If you purchase something—property, land, a collectible, etc.—withthe intention of earning a return, it’s an investment. And its value canfluctuate, just like the investments you hold in your portfolio.

My recommendation: Focus on what you can control, whether you’re investingin a mutual fund, a rental property, or a collectible car.

  • Cost: The amount you pay initially, plus any ongoing fees or miscellaneous charges, raises the bar for how much you have to earn to make a profit.
  • Diversification: “Don’t put all of your eggs in 1 basket” is the perfect cliché to prove this point. When you own only 1 type of investment, you increase your overall risk. For example, if the bulk of your retirement savings is coming from the sale of your home and a vacation property—and the real estate market dips—you may experience a shortfall. Mixing different types of investments together can lower your overall risk, since different types of assets usually perform differently at any given time.
  • Discipline: You can’t control how the market (the financial market, the real estate market, or something else) performs today, and you can’t predict what will happen in the future—so don’t try. Make a plan and hold yourself accountable for sticking to it. Or work with an advisor to eliminate the temptation to make a hasty change to your portfolio based on recent events.

Lack of clear goals 

Fact: If you don’t have a specific goal in mind, it’s impossible todetermine whether you’re meeting it. If you have no idea how much you should besaving, how do you respond to the question, Are you saving enough? 

My recommendation: Figure out your goal with the help of an online resource or an advisor. If you’re close to retirement, for example,look at your current annual income or annual take-home pay and work backward.Say your take-home pay is $75,000 per year. Consider making that amount yourtarget replacement income amount, especially in the early years of retirement.Many planners use the 70% or 80% income-replacement rule for retirees, but I’vefound that many retirees need 100%. In fact, some retirees need more! Whileyou’re likely to lower certain expenses (or eliminate them altogether) inretirement, other expenses (travel, costs associated with helping familymembers, etc.) can end up offsetting these reductions.

If you’re further from retirement, look forward. Aim to save at least12%–15% of your income, including any employer match, for retirement (closer to20% if you plan to retire early).

Feeling that no amount will ever be enough 

Fact: You may fear the prospect of supporting yourself (and potentially aspouse or other family members) when you’re no longer receiving a steadypaycheck. This feeling is common among investors, but don’t let it paralyzeyou.

My recommendation: Set a realistic goal. Adjust your goal if yourcircumstances change. If you know you’re saving enough to meet your long-termgoal, don’t be weighed down by the thought that you should be savingmore.

Also, keep in mind that many retirees decide to work part-time to addstructure to their days. If you find yourself in this position, use the extraincome for peace of mind, a reminder that you’ll be able to support yourselfover the long term. Most importantly, strike a balance between enjoyingyourself now and preparing for the future.

On the other hand, if your current saving habits aren’t going to put you ontrack to meet your long-term goal, do something about it. Start by ensuringthat you have the appropriate asset allocation for your time frameand risk tolerance. Then increase your retirement contributions each yearand resist the urge to make unnecessary changes.

Bottom line: Face your fear. If you’re not saving enough today, take actionso you’ll be in a better position tomorrow.

The million-dollar question 

Now you know how other pre-retirees feel about their retirement savings.And you know the factors that contribute to those feelings (as well asrecommendations for dealing with them).

So tell me, are you confident you’re saving enough for retirement?

*Employee Benefit Research Institute, 2018 Retirement Confidence Survey,https://www.ebri.org/pdf/surveys/rcs/2018/2018RCS_Report_V5MGAchecked.pdf 


  • All investing is subject to risk, including the possible loss of the money you invest.
  • Diversification does not ensure a profit or protect against a loss.
  • Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

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