Paul C. Schauer

(Bowling Green State University, Bowling Green OH 43402, USA)

 

 

Abstract: Planning for retirement is generally not a priority until later in life. For a traditional graduating student, the time until retirement is twice their current age. They are concerned with purchasing a new vehicle, paying student loans, or just enjoying the income level they worked so hard to attain. For a couple in their early forties, retirement planning is not a priority, things like a mortgage and the education of their children are. Retirement is still 20 to 25 years away. While they may be contributing money to the company sponsored defined contribution plan; they have put little thought into the amount they are deferring. If people have done any retirement planning, either consulting with a financial planner or using a book or a web site as a reference tool, the result is generally a very large number designating how much money they will need to retire. For most, that number seems unattainable. Other experiences with retirement planning may include speaking with an individual who was more interested in selling their product than actually helping people formulate a viable plan. This paper takes a different perspective. It examines the amount a person is saving for retirement, and then determines the lifestyle they will be able to live once they retire. If that lifestyle is not acceptable, the retirement savings required to maintain their lifestyle at retirement calculated as a percentage of their current income is also presented.

 

 

Key words: retirement planning; retirement savings; 401k contribution rates

 

JEL codes: D140, D130, D190, I31