You
work hard for your money. Retirement is the time for your money to work
hard for you. Whether you're just out of school, in the midst of your
career, or nearing retirement, it's vital that you plan for your
retirement years. The planning you do today will play an important role in
the quality of life you enjoy tomorrow.
Planning
for retirement is becoming more and more important. Unlike in our parents'
generation, the government and private employers today play only a limited
role in most people's retirement plans. That means it's up to you to
establish a sound financial plan that will support you in your retirement
years. Not only do you want an income stream on which you can live, it
also needs to outpace inflation and protect you against excessive
taxation.
The key steps of
retirement planning:
 | Examining your current financial
situation |
| Determining how much you'll need and
when |
| Exploring your savings and investment
options, and |
| Establishing your investment strategy. |
|
The Cost of
Waiting
While it is never too late to
create a financial plan for your future, the chart below
illustrates the benefits of starting early.
|
Begin investing $2000 per
year at 8% at age: |
Account balance at age 65 |
Years lost by waiting: |
Lost earnings |
|
25 |
$518,113 |
0 |
$0 |
|
35 |
$226,566 |
10 |
$291,547 |
|
45 |
$91,524 |
20 |
$426,589 |
|
55 |
$28,973 |
30 |
$489,140 |
|
60 |
$11,733 |
35 |
$506,380 |
|
The amounts shown in this
example are hypothetical for illustrative purposes only. They
are not guaranteed and do not represent an actual investment.
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Retirement Basics
Contribute to your company's
retirement plan, 401k, 403b, deferred compensation, or other
retirement plan when available. If self-employed, you can contribute to a
SEP-IRA, Simple-IRA, Keogh, Roth IRA, or regular IRA. Most everyone
can contribute to a Roth IRA or Individual Retirement Account (IRA), on
their own. Many companies and non-profit organizations will match or
partially match an employee's contribution. Also, most retirement
contributions are taken from your gross income before taxes; this amounts
to a large savings.
Over time, with matching funds from your
employer, regular contributions, tax-deductible and tax-deferred
retirement accounts, you can build a substantial retirement account, but
only if you contribute! So start contributing now, and consider making
your maximum allowable contribution. Considering the built-in tax
savings and employer matching funds, you can actually lose money if you
don't contribute to your company retirement plan, or a voluntary
self-employment or small business retirement plan.
Get an estimate of your social
security benefits at retirement by contacting the department of social
security at
www.ssa.gov.
The social security administration can mail you a copy of your past
earnings and estimated social security at retirement. By getting this
report you can verify that you were given credit for every year you paid
social security tax. Social Security is not considered a total retirement
plan. Instead it is a supplemental retirement plan, to be used in
conjunction with a company retirement plan or individual retirement plan.
Annuities are frequently purchased to provide income you cannot
outlive. Either immediate or deferred annuities may be an important
consideration. Fixed and the newer index annuities both offer a guaranteed
rate regardless of market conditions.
Annuities |
