Saving to Retire? 10 Things You Should Consider

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By JillKostow

Facts About Retirement

Do you know that fewer than half of Americans have calculated how much they will need to save for retirement?

Did you know that in 2009, 13% of private industry workers with access to a defined contribution plan did not participate?

Did you know that the average American spends 20 years in retirement?

Positive Thoughts

Financial security in retirement does not just happen. It takes planning, commitment, and money.

It is never too early or too late to start saving for your retirement!

The more time you have to save, the more time your money has to grow!!

10 Things You Should Consider

  1. Determine Your Needs -Retirement in not cheap, it is expensive. People who earn an average income will need about 70% of their preretirement income just to maintain their current standard of living. Depending on your income level this percentage may be higher or lower. It is best to determine early on where you stand so you can begin to plan ahead.
  2. Save - You need to start saving if you haven't already. You can start small, but you should try to increase the amount as often as possible. Saving for your retirement should be a priority. So set goals for yourself and stick to them!!
  3. Contribute to Employer Savings Plans- If you employer offers a retirement savings plan you should sign up and contribute as much as you can. These plans usually consist of a 401K. A 401K is a retirement investment plan that allows an employee to put a percentage of their earned wages into a tax-deferred investment account that is selected by the employer. Tax-deferred means that the paying of taxes on earnings is postponed until a later date. So you can save now and deal with taxes later. You will not be taxed until you withdrawl the money. Also with this type of plan your employer will match a percentage of your contribution. Be sure to check the amount you will need to contribute to take advantage of the employers full match.
  4. Pension Plan- A pension plan is an arrangement to provide people with income when they are no longer earning a regular income from employment. These plans are usually tax-exempt. The employer makes the contributions toward a pool of funds that is set aside for an employee's future benefits. The pool of funds is then invested on the employee's behalf upon retirement. There are different types of pension plans so be sure to obtain information on your employers plan.
  5. Ask for A Plan - The company you work for may not offer a retirement plan. If this is the case you can suggest that it starts one. There are a number of options available,so the company should be able to choose a retirement plan that will benefit both you and your employer.
  6. Individual Retirement Account (IRA)- An IRA is an investment account in which a person can set aside income up to specified amount each year. Most IRAs will allow you to place up to $5000 a year into it, or if you are age 50 and over, you may be able to place in more. The contributions you make are usually deducted from your taxable income, and the contributions and interest are tax-deferred until retirement. You have two options you can choose from; a traditional IRA or a Roth IRA. You will need to determine which type will meet your retirement needs.
  7. Social Security Benefits- Social Security pays benefits that are on average equal to 40% of your preretirement earnings. The funds are taken from your employment earning throughout each pay period. Every year you will receive a statement that will give you an estimate of how much your benefit will be and when you will receive it.
  8. Basic Investment Principles - You should consider basic investment principles because how you save can be just as important as how much you save. If you are using savings or pension plans from your employer make sure you know how the money is being invested. You also can also use a few investment plans, by doing this you can reduce your risk and improve your return. Also be aware that your investment may change over time. Some factors that may affect your investments are; inflation, your age, goals, and financial circumstances.
  9. DO NOT TOUCH!- You do not want to touch your retirement savings until you have reached your retirement. If you withdrawl your funds early you will lose principal, interest, and possibly tax benefits. You may also be required to pay early withdrawl penalties. If you change jobs you can choose to leave you savings in your current plan; or roll it over into an IRA; or roll it over to your new employer's plan.
  10. Always Ask Questions - Be sure to talk with your employer, your bank, your union, or a financial advisor. Ask questions and also make sure you completely understand the answers that are given to you. By doing this you can feel better equipped to make a proper decision in regards to the retirement savings plan that will best fit your needs and goals.

 

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Comments

virtualmoran profile image

virtualmoran 10 months ago

Retirement funds are the best way to invest. but many people realize it only when they reach their retirement.

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