How much money do you need for retirement? Financial advisors get involved

KALAMAZOO, Mich. – For many of us, retirement is a goal we look forward to. For others, it’s a financial benchmark that seems impossible to save for, especially when a Bank of America Institute survey found that about half of households are living paycheck to paycheck this year.

So how much do you need to retire comfortably?

News Channel 3 asked a financial advisor what people should do at different stages of life and spoke to two women who are choosing to work well into retirement.

Staying on your feet quickly is part of the job at Rykse & Co. in Texas Township.

Ann Randol serves cinnamon rolls at age 72.

“I never really thought about quitting. I guess I keep working because I can,” Ann said.

Ann has been a familiar face at Rykse for more than 25 years, as she tells us that clocking in at work gives her life structure.

“I was raised to believe that you work, you just work, that’s what you do, and I think if you stop, your quality of life doesn’t improve,” Ann said.

But there’s someone else on staff who gives Ann competition. Over there is 87-year-old Marlene Stoops, pouring fresh coffee.

“I feel good. “I’m healthy, I’m active, and that helps me be active, sometimes a little more than necessary,” laughed Marlene.

Marlene told us last year that her financial situation had changed.

“I have a variable rate home equity loan on my house and the interest rates went up and my payment went half toward interest and half toward principal and that didn’t even cover the interest anymore,” said Marlene.

That’s when Marlene called her financial advisor. “And he said, ‘Have you thought about going back to work?’ And I said, ‘Yes, I have,’ and a week later I called him and said I had a job!” said Marlene.

News Channel 3 anchor Jessica Harthorn also called a financial advisor to find out how much money the average American needs to save for retirement these days.

“There are a lot of studies that say you can withdraw 4% of your portfolio, so a million dollars is $40,000 a year,” said Ryan Daus, the owner of Daus Financial Group.

A million dollars? That seems like a lot. However, Daus said it depends on how much money you want to spend each year in retirement.

“Produce more than you consume. That’s right, you have to save something. Ideally we would like to see 10-20%,” Daus said.

And beware of what he calls “lifestyle creep.”

“They start spending a little more, eating at nicer restaurants, going on nicer trips, and then before you know it, they’re spending every bit of the raise they just got and still can’t save.” said Daus.

“If you can’t handle $50,000, you can’t handle $50 million. And if you look at athletes, if you look at the majority of lottery winners and entertainers, they might be very rich for a short period of time, but they’ll be just a few paychecks away from being broke. So it’s about learning how to live within your means,” said Daus.

News Channel 3 asked Daus to break it down for us. What should Americans do at every stage of life to plan for retirement?

Let’s say you are 25 years old. Daus said start by enrolling in your employer’s 401K plan and start saving, even if your paycheck is $20.

“Get it in there, get going and don’t think about it,” Daus said.

If you’re 45, Daus says it’s time to find a financial planner, maximize your 401k contribution, invest in active real estate like rental properties, and continue building your savings account.

“Many employers allow you to contribute to two different accounts,” Daus said.

And for those age 65 who are nearing full retirement age, Daus recommends paying down high-interest debt and examining your lifestyle choices.

“Sometimes it is much easier to eliminate an expense than to build an asset to cover that expense,” Daus said.

Finally, Daus said people should consider delaying retirement altogether, like Marlene and Ann, who still enjoy earning a paycheck.

“The more you save for retirement, the more fun you can have,” Marlene said.

“Life is great. If you need to start something new, there’s no better time to do it than when you’re his or my age, and I’m confident now,” Ann said.

Financial advisers say Social Security will increase, on average, about 6% per year between ages 62 and 67, and about 8% per year between ages 67 and 70.

Once you reach full retirement age at age 67, you can earn as much money as you want without affecting your Social Security benefits.