According to the United States Department of Labor, fewer than half of all Americans are adequately planning for the 20 years that the average American spends in retirement.
It is estimated that a person on an average or higher income will need at least 70% of their current income after retirement to maintain their current standard of living. For low income earners, the estimate is 90%.
Some people hand over their retirement planning to expert financial advisers. Basic retirement security requires planning, commitment and discipline but it is not complex.
There are many resources available both commercial such as moneysupermarket and governmental to help you plan your retirement strategy.
Some experts may take risks that are not acceptable to you, resulting in losses that affect the outcome of your retirement plan. It is wise to only risk a portion of your money and to spread your investments to minimise risk.
To begin with, it is important to assess your retirement needs. Be realistic and set achievable goals based on your current standard of living.
Consider how inflation will affect what you can afford in the future. This will require expert analysis by a professional for accuracy, but a good rule of thumb is that prices double every 10 years.
Find out what type of retirement plan your employer offers. If there is none, then request that be one be created. If a plan exists, then find out what the benefits are and what happens if you leave the company.
If your employer offers a 401(k) retirement plan, then sign up and contribute as much as you can. There are tax benefits to doing this and your employer may contribute more as you do.
It is always important that a person diversifies their retirement portfolio. On top of your employer’s plan, there is also the Individual Retirement Account. Here, you can save $5000 tax free a year or more if you are over 50.
Additional options are purchasing retirement annuities, investing in stocks and bonds and buying property. All of these require expert financial advice and are higher risk than government sponsored plans.
The younger you are when you begin saving, the greater your options and the better the returns. As a young saver, you can take on more risk as a part of the plan.
Typically, a young investor, say 30 years old, has 30% of capital in secure savings and 70% in a variety of higher risk ventures. As a person gets older, so the risk portion should decrease and the secure portion increase.
It is vital that retirement savings are left untouched. There are usually penalties involved in early withdrawals and there may also be a loss of tax benefits.
There is also the Social Security benefit to consider. This typically pays out at 40% of your final salary but check with your annual Social Security Statement to find out exactly what you will be entitled to.
Retirement planning for peace of mind and well being is essential in this day and age. The sooner you start the better but always better late than never.
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