Since the beginning of your career, you’ve been encouraged to save for retirement.

Even though retirement seemed far away, your employer gave you paperwork to complete when you were hired. The paperwork was regarding their employer-sponsored retirement savings plan.

At one time, pension plans were the only option.

Then as employees no longer stayed with the same employer for their entire career, the portability of retirement savings became important.

That’s when defined contribution plans (e.g., 401(k), 403(b)) grew in popularity. These employer-sponsored retirement savings plans allowed you to contribute money.

And if you left that employer, you could take your retirement savings with you.

In the late 90s, I worked for a subsidiary of Northern Trust. The subsidiary managed employer-sponsored retirement plans – both defined benefits and defined contribution plans.

During that period, I watched the defined contribution business grow significantly as the defined benefits side shrank in size. Companies were shifting from pension plans to the highly desired and portable 401(k) plans (or other similar defined contribution plans).

You might have experienced this shift if you received notification from your employer about the pension plan being frozen. They also may have given you options to participate in a new defined contribution plan (e.g., 401(k)).

So, you’ve worked and saved diligently and now find retirement around the corner.

Are you on track to saving enough money for retirement?

Will you outlive your savings?

The answer is …. “it depends.”

It depends on a lot of factors – your retirement lifestyle, inflation, market risk, changes in family needs (e.g., your adult child needs to move in temporarily or an elderly relative needs caregiving), health care expenses, long-term care needs … and the list goes on.

With so many unknowns, it’s normal to feel overwhelmed when planning for retirement.

It would be easier if we had a crystal ball to give a definite answer … but unfortunately, technology has not created that option yet.

However, we do have software to run “what if” scenarios to give some comfort in whether you’ve saved enough money.

But as the disclaimer on any report will state, “Assumptions made are for illustrative purposes … there is no guarantee that results shown in the analysis will be achieved, and actual results may deviate from those reflected in this analysis.”

But the very first step before running any calculation is for you to define how you envision your retirement lifestyle.

It’s common for many couples to have different perspectives, and that’s why the conversation needs to happen sooner rather than later.

Ten years before you want to retire is an ideal time to start this process. It gives you time to resolve differences and manage your expectations.

If you haven’t saved enough money for your retirement lifestyle, you may need to work longer and/or spend less.

With my clients, we begin retirement planning by discussing the 5 P’s of Life: personal relationships, personal finance, profession, peace of mind, and physical health.

Addressing questions in these five key aspects of life helps them better define their retirement lifestyle. Once I understand their expectations, then we can calculate if they’ve saved enough money.

Retirement will span at least 30 years for most people. During that time, mobility may change.

For that reason, I segment retirement into three stages: very active, moderately active, and not active.  

This concept helps clients identify how their retirement lifestyle will evolve and how their expenses will change. For example, money spent on entertainment during early retirement years will shift to health care as mobility changes.

Planning for retirement can be overwhelming with many unknowns about the future. But it doesn’t have to be.

Start by defining how you envision your retirement lifestyle. Once you have a clear description, then you can estimate how much you will spend in retirement. This number will be the basis for running many calculations to determine if you’ve saved enough or need to make adjustments.

(Update to original post from July 18, 2017)


Niv Persaud, CFP®, CDFA®, RICP®, is a Managing Director at Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life, and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter, and financial advisor. Her services include developing  comprehensive financial plans, divorce financial reviews, and retirement plans. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me.’”