When I was 40 years old and I thought wistfully about retirement in another 20 years or so, it all seemed so romantic. Huge pension, unlimited money, great car, little cottage with a picket fence, the whole 9 yards. Now I’m 67 and there is no way I can even think of retirement. The problem? Everything is so expensive. My once great pension is now a pittance. Like many older people, my money is in my home. … I’m stuck.

 

In the 1990s my mother became ill and needed long-term care so I tapped my individual retirement account for funds and stopped making contributions. Then came the tumultuous stock-market ups and downs of the past decade, dealing the IRA another blow. To make ends meet, I went back to work part time last September, as a data-entry clerk at a senior center. I now hope to retire by age 70, but I’ll have a hard time doing so if I can’t sell my house. Many older people find themselves in this position: still working or in need of a job.

 

More than three in five U.S. workers in their 50s and 60s plan on working past 65 and 47% of that group say they’ll do so because they’ll need the money or health benefits. In this tight labor market, working into your golden years isn’t easy. And you’ll have to make your age and years on the job come across as assets, not liabilities. In addition, with the current market upheaval, you’ll need a financial plan that puts your savings on the fast track and takes into account how Social Security and Medicare benefits could be affected.

 

For many older workers, the easiest option may be to continue with their current employer. This means making themselves essential. Workers should take on new projects when possible. And it’s crucial to stay on top of the latest technology being used; you don’t want to be perceived as the old guy who doesn’t know what’s going on. Older employees also can put their experience to use by volunteering to mentor younger workers either formally or informally.

 

Of course, some workers may have to take illness or physical limitations into account. If you feel like you can no longer manage physical labor, late hours or travel, talk to your manager about moving to a different position, says Beverly Harvey, a career coach. Suggest the position you’d like to move to and show how you’re qualified for it, she says.

 

Another option is phased retirement programs that let workers gradually reduce their hours, says Cornelia Gamlem, president of human-resources consulting firm GEMS Group. There also are job-sharing arrangements, she says. For instance, if you and a co-worker are both thinking of paring your work hours, approach management with a plan detailing how you could divide your time and responsibilities. Just keep in mind that a change to your full-time status could affect your eligibility for benefits such as health insurance or a 401(k) match.

Life is an ever-changing scene. We have no idea what will be tomorrow, or next year or at the time we are about to retire. We have to find some sort of balance that makes sense today and will make sense in the future, not an easy task. Will taxes go up? What about inflation? How much do I need in retirement to continue my lifestyle? With so many questions, spread out across so many years, it’s hard to know if you’re saving too much or too little unless you do a little planning.

 

Most retirement investment planning, at least when you’re in your early twenties, focuses on two accounts – a 401(k) and an IRA, typically a Roth IRA. The contribution limits are $16,500 for the 401(k) and $4,000 for the IRA, higher if you are permitted a catch-up contribution due to your age. If you were to max out your contribution to both, that’s a hefty $20,500 a year towards your retirement. That’s a lot of money for anyone to be contributing and I’d argue that contributing $20,500 each year until you retire is too much. Unless you make a lot of money, contributing that amount will put a significant strain on your current lifestyle and that’s a tradeoff that you may not want to make.

 

How much will you need in retirement? Ask ten people and you’ll get ten numbers. They will all be wrong. I do something simple, I calculate how much money I need to live on today and use the 4% rule. The 4% rule is a retirement rule of thumb that says you can only spend 4% of your nest egg each year if you want it to last for the rest of your life. With appreciation and interest, a 4% drawdown is ideal. That means if you want $40,000 a year in income, you’ll need a $1 million in retirement savings. If you want $80,000 a year, that’s $2 million. Calculating how much you need will depend on your lifestyle, so that’s up to you.

 

From there, you’ll want to set the finish line at 65 (or whenever), and calculate how much you need to save each year in order to reach that number. Then, calculate how much those savings will grow given rates of appreciation (minus inflation). You can use whatever growth rate you feel comfortable with, I personally use 7% (and 3% inflation). That will give you how much you need to save each year.

 

One point I purposely overlooked was taxes. Contributions to your 401(k) are tax deductible but you pay income taxes on the disbursements during retirement. If you need $80,000 a year and it comes entirely from a 401(k), you’ll need to save for more because you’ll be taxed on that income. I conveniently ignored it because it complicates things and I just figured that any Social Security payments would help offset that tax so that the math would come out close enough. I could be wrong but for the sake of simplicity, that’s where we’re going. 

 

So, are you on track with your retirement savings?

The important keys to financial security are good habits. If you want to put yourself in position to weather any financial storm, you need to understand and follow only four good habits:

Studies show that Americans load themselves down with large debts compounding the difficulties they face in making themselves financially secure. Only those who keep their debts under control stand a chance to make themselves financially secure. Homeownership is a reasonably good store of value in the long-term. There’s nothing wrong with taking on debt to buy a car, either.

 

Consumer debts are those that people pile on to buy consumer goods such as televisions, do-it-all telephones, vacations at expensive resorts and the like. Credit card use is usually a bad idea for the individual because it leads to overspending, not to mention high interest charges if you don’t pay your balance off every month. The solution: Use cash when buying anything other than irg-ticket items.

 

Studies show that Americans work harder than most other people in the world, and what they have to show for it is an economy that creates extraordinary wealth year after year, decade after decade. People who want to make themselves financially secure don’t always love their work but they need a paycheck like everyone else. Hard work pays off in many ways. It creates opportunity, for example; in any company, it’s the hard worker who gets the difficult assignment, and it’s the difficult assignment done well that gets the raise or the promotion, or both. Hard work brings you two bonuses: The first is the satisfaction of knowing that you’ve done your best. The second is a small miracle. No matter what your job, if you master it, you can’t help but like it. And if you like your job, you’ll work hard at it.

 

At least 10 cents of every dollar you earn. The solution to the problem of putting money aside into savings is simple. If you don’t make it a priority to put money aside into your savings every month, you won’t lose your house, to be sure. You’ll just lose the chance to make yourself financially secure, and no matter what your age, study after study shows that you will almost certainly reach that goal if you put aside at least 10 cents of every dollar you make, and preferably 15 cents.

 

Protect yourself against catastrophe with appropriate insurance. No matter how good a driver you are, you can have an accident. No matter how carefully you guard your health, you can get sick. No matter how young you are, you can die. Insurance is the only way to protect yourself and your family against these risks. Find a good insurance agent, figure out what risks you face, and get insurance to cover them.