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Written by Keith Schwanz
From his column It's Your Money

About 20 years ago, my wife and I decided to spend our two-week vacation remodeling the kitchen and dining room. We started the first thing Monday morning by hauling out appliances and removing the dark walnut cabinets with bamboo weave insets in the doors. We replaced the window over the sink and put in a new patio door. Over the next several days we installed new cabinets and a sink, glued laminate to create new counter tops, painted walls, laid new vinyl flooring, and, as a grand finale, wheeled in new appliances. We wrapped up the project just as it was time to get back to the jobs that made it possible to finance such an extensive project. Not wanting to ignore the need for rest, we took the weekend in the middle for a holiday. We started the three-day outing in Long Beach, Washington. After checking into our motel, we took a leisurely stroll on the boardwalk and gazed as peaceful waves raced up the sand toward us.

After breakfast the next morning, we headed north on US 101. We commented on the tall fir trees that lined the highway as the evergreen-scented coastal air wafted through the open windows. We talked about our kids, our jobs, and our friends.

We did not have motel reservations for the second night. We thought we would stay in Port Angeles, maybe even take a day trip by ferry to Victoria, British Columbia. When we arrived in Port Angeles, however, we discovered a youth baseball tournament had filled the motels to capacity. That’s okay, we said, we’ll just go a little farther to Sequim. All motels there were booked too. We’ve never been to Port Townsend, we said, let’s go exploring. The Port Townsend streets were filled with people shoulder to shoulder, so we didn’t even ask about a room. We turned south along Hood Canal and ended up in Olympia for the night.

By the time we settled into our motel room, we had been on the road for 8 hours and had driven 325 miles. If we had taken the direct route from Long Beach to Olympia it would have taken about one-quarter of the time and only about one-third of the gas.

We enjoyed those unscripted days of summer in the Pacific Northwest. As the type of person who plans, checks the plan, then reviews the plan again, it probably did me a world of good to go unstructured for three days. In fact, the go-with-the-flow attitude may be the best vacation option for someone like me. But this is not the way to prepare for retirement.

Planning for Retirement

The Center for Retirement at Boston College in the study How Much Should People Save?, estimates that a person with modest compensation who wants to replace 70% of pre-retirement income and retires at age 62 will need to save 15% of income from age 25 on. If the person waits until age 35 to begin saving, then 24% of income would be needed to reach the goal. A person who starts at age 45 and wants to retire at 62 would need to put away 44% of income. Obviously, the earlier a person begins to save for retirement, the lower the percentage needed to reach the goal. Here’s a chart based on the Boston College study.


Savings Rate Required for a Medium Earner to Attain a 70% Replacement Rate
Retire at: Start saving at:
25 35 45
62 15% 24% 44%
65 10% 15% 27%
67 7% 12% 20%
70 4% 6% 10%

From Center for Retirement Research at Boston College, "How Much Should People Save?"


Unfortunately, too many people seem to treat retirement planning like a summer stroll. The National Retirement Risk Index estimates that 52% of households are at-risk for being unable to maintain their standard of living in retirement. A recent study of pastors in the Church of the Nazarene estimates that only 8% will be financially ready for retirement before the age of 70, and 42% will have to work past the age of 72 to be able to maintain their household financial position.

So where does a person begin? A 25-year-old might start investing for retirement by saving 4%. Ten years later it may be possible to increase the savings rate to 6%, then ten years after that to 10%. This is a modest percentage compared with a 45-year-old looking at putting away $44 of every $100 earned to meet the retirement goal.

My wife and I did not run out of gas on our lazy, crazy day of summer driving. Our lack of planning had no consequence on our vacation. But that will not be the case for the person who ignores preparing for retirement. Without proper attention to the details now, future years could include a significant decrease in the standard of living and considerable increase in anxiety and uncertainty. No one wants that.

Keith Schwanz works as a writer and editor. He previously served as a pastor and seminary educator.

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