Imagine the Possibilities
Evaluating Your Retirement Needs
Your Employer's Retirement Plan - a Great Place to Start!
Imagine the Possibilities
When you envision your retirement years, what do you dream of? Spending time with your family and friends, pursuing your hobbies, learning new things, volunteering for your favorite charity - imagine the possibilities.
Today more and more people are maintaining their current lifestyle well into retirement. Modern retirement is active, engaging, and independent. As a society, we are generally taking better care of ourselves, and as a result, we're living longer. These factors affect the way we must plan for our retirement. Social Security may not provide what you'll need to live comfortably in retirement, and odds are against winning the lottery. How can you make sure you will have enough money to retire? When should you begin saving?
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Evaluating Your Retirement Needs
How Long Will You Be Retired?
Most of us have an idea of when we'd like to retire, but it is also important to estimate how many years you will spend in retirement. This is especially important today since many people are living longer. One of the greatest fears of retirees is outliving their retirement savings and running out of money. As a result, one of the goals of your retirement plan should be to ensure your money lasts as long as you do.
How Much Do You Need?
Experts estimate that you will need at least 80% of your pre-retirement income to live comfortably in retirement. When you retire, you probably won't have the expenses you do now, such as a mortgage or a child's college tuition, but costs such as medical care may claim a sizeable share of your retirement income. With this in mind, some financial planning experts estimate you may need as much as 100% of your pre-retirement income just to make ends meet.
How Will You Fund Your Retirement?
Planning and investing during your working years will help ensure that you will be able to live comfortably in retirement. Once you retire, the paycheck you rely on today will be replaced by Social Security, personal savings and your retirement plan assets. The first step in meeting your retirement needs is estimating how much you need to invest to reach your long-term goals.
The Sooner the Better
While it is never too late to start saving for retirement, the sooner you begin, the longer you have to achieve your goals with less effort and resources. Over time, even the smallest steps can become a giant leap toward reaching your goals, thanks to the power of compounding.
Consider this - four people begin saving for their retirement at different stages of their lives. Here's how the retirement nest egg of each would compare at age 65 based on an 8% hypothetical annual effective rate of return.
Investing $100 per month at different stages of life
|
Age
|
Amount Invested
|
Total Value at age 651
|
|
Start at age 55
|
$12,000
|
$18,128
|
|
Start at age 45
|
$24,000
|
$57,266
|
|
Start at age 35
|
$36,000
|
$141,761
|
|
Start at age 25
|
$48,000
|
$324,180
|
1 There is no guarantee these figures will be attainable in the future. This hypothetical illustration is not meant to represent the return of any specific investment.
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Your Employer's Retirement Plan - a Great Place to Start!
If your primary financial goal is to build retirement savings, we suggest you first take a look at the retirement benefits that might already be available to you through your workplace.
If your company offers a retirement plan, you might be eligible to contribute a percentage of your paycheck, up to a specified maximum. Often you are given the choice of contributing before-tax dollars, which means the amount of your salary subject to income taxes is lowered and you may pay less in taxes. Furthermore, as an incentive to save for retirement, your employer may match a percentage of the dollars you contribute, sometimes equaling one dollar for every dollar you put in. Lastly, most plans offer more than one investment choice with the goal of appealing to both conservative and aggressive investors as well as providing the opportunity for diversification.
The benefits of contributing to your employer-sponsored retirement plan are undeniable, but if you do not have this option available, or you are looking to build additional retirement income, we can help you find a strategy to work toward accomplishing your goals.
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For more information, please contact us.
