Retirement saving can be started by persons from all ages, from 21 to 65. However, it becomes even more essential for seniors from the age 55 to 64 year olds to start thinking deeply towards their retirement as it will be pending in a decade or so. It is never too late to start saving for retirement, however from the age of 54, it becomes very important to have a retirement plan that will help you accomplish your goals and live the good life you have always dreamed of living. This article will help you decide if you are financially ready for retirement or if you have a projected shortfall and if you need to modify your 401k or Roth IRA contributions, saving strategies, goals or objectives to meet the shortfall. To calculate this, you will need to amalgamate the following information:
i) Balance of all your 401k or Roth IRA retirement plans
ii) Your income tax bracket
iii) Average rate of return on all your savings
iv) Your current income
v) Your income expectancy upon retirement (If you participate in a definedbenefit pension plan, your plan administrator can give you an estimate of the amount of income you should expect to get upon retirement)
Age:  55  Annual Salary  $80,000 
Retirement Goals  Spouse’s Annual Salary  $65,000  
Planned Retirement Age  70  
Years to stay in Retirement  20  
Expected Income Upon Retirement  80% of Current Income (PreTax)  
Expected Social Security Benefits  $2000  
Tax Deferred Investments

Tax Free Investments


401(k), 403(b), SEP IRA, Profit Sharing  $80,000  Roth IRA balance  $20,000 
Ongoing monthly contributions to 401(k) plan  10% of Salary  Monthly Contributions to other Taxfree Savings accounts  $200 
Employer Matching Contributions  100% upto $3000  Expected rate of return on taxfree savings  8% 
Traditional IRA balance  $25,000  Expected rate of return on investments after retirement  5.5% 
Planned monthly contributions to Traditional IRA  $200  
Expected rate of return on taxdeferred savings  8%  
Expected rate of return on investments after retirement  5.5%  
Taxable Investments

Planned Lump Sum Contributions to Retirement accounts from Annual Bonuses


Taxable retirement savings  $25,000  $5000 in 2007  
Planned monthly contributions to Taxable Savings  $200  $5000 in 2008  
Expected rate of return on taxable savings  8%  $6000 in 2009  
Expected rate of return on investments after retirement  5.5%  $7000 in 2010  
Federal income tax rate  28%  $7000 in 2011  
Expected salary increase rate  3%  Avg. annual rate of inflation = 3.35%  
Source: Denise Appleby, Appleby Consulting Inc.

Percentage of Need Met v/s Projected Shortfall
Using the investment calculator provided atwww.applebyconsultinginc.com in the members section, here are the concluding numbers:
Projected Need upon Retirement – $1,875,400
Projected Assets upon Retirement – $1,002,945
Projected Shortfall – $872,446
Additional Monthly Investment Needed to Achieve Goal – $3090
This indicates this investor will only achieve 54% of their retirement goals ($1,002,945 / $1,875,400) and have a projected yet critical shortfall of 46% ($872,446). Although this is bad news, many savers are in this exact position. This is because they did not start saving for retirement early enough, or did not save at all. If you are one of these people, do not be alarmed – you could still achieve your goals by modifying your objectives, financial strategies, etc. These modifications may include:
i) Reduce your monthly expenses, such as eating out or recreational life. For example, if you save an extra $50 a week, that amounts to $200 a month and at an interest rate of 4% compounded annually, that would total almost $80,000 at the end of 20 years!
ii) Get a second job and specialize at a skill that you excel at. If you can pull in an extra $10,000 a year, that amounts to $347,192.52 at the end of 20 years assuming an annual interest rate of 5% compounded. As you can see, this number is significant!
iii) If your employer matches your contribution under a salary deferral 401k, try to contribute the maximum possible so as to maximize the amount of money you get from your employer.