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Columns: Dr. Don
Don Taylor, Ph.D., CFA, CFP Expert: Don Taylor, Ph.D., CFA, CFP
Ask Dr. Don
Don't compare your savings to what others do
Ask Dr. Don

Getting on track for retirement

Dear Dr. Don,
I am 43 years old and starting to think about retirement planning. My wife and I make about $50,000 combined. We are able to live rent free at the moment, and we have two rental homes, both rented, with combined mortgages of about $140,000. We have no other debt.

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I contribute $3,960 annually to a Roth IRA and have a traditional pension at work where I have been for 10 years. My Roth balance is only about $20,000, we have an emergency fund of about $15,000 and savings of about $15,000.

I know I need to make up for a lot of lost time when I was not thinking of retirement, but can you offer any advice for me insofar as maximizing my chance at a comfortable retirement? I read what others have saved and I realize I am lagging far behind. Help! I feel like I am doomed!
-- Mark Milestone

Dear Mark,
Doomed? A lot of your contemporaries would be envious that your employer still offers a traditional pension and that you have 10 years of service at age 43. A pension combined with Social Security benefits is two of the three legs of the "retirement stool," the third being your retirement portfolio.

An easy way to ramp up your retirement portfolio is to have your wife start to contribute to a Roth IRA account, too. This step would allow you to double your annual contributions into the Roth accounts to $8,000.

With $15,000 in an emergency fund and $15,000 in savings, you're invested very conservatively. If you're comfortable investing in the financial markets you could consider investing the savings elsewhere.

There are always going to be people that have more, or less, socked away for retirement than you do. Don't use that yardstick to determine whether you're on track with your retirement plans. Consider when you want to retire, how you want to live in retirement and the expected costs of that lifestyle, including health care, to determine how much money you'll need to accumulate for retirement.

I like the SmartMoney Retirement Worksheets as much as anything I've seen for a quick and dirty estimate of how you're doing in working toward your retirement goals.

Bankrate.com's corrections policy -- Posted: July 27, 2007
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