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Are You Planning for Your Retirement?

The sooner you start saving for your retirement, the more time your money has to grow.  The sooner you start stashing money away the better.

According to the U.S. Department of Labor (DOL), fewer than half of Americans have calculated how much they need to save for retirement. The average American spends 20 years in retirement yet in 2012, 30 percent of private industry workers with access to a defined contribution plan (such as a 401(k) plan) did not participate.

 “How much money do I need to retire?”

The answer to that question is, there is no “one” answer that applies to everyone… it depends on many factors such as your target retirement age, your expenses and your desired standard of living.

Here are a few steps you can take in order to start building your nest egg in preparation for retirement.

Start Saving Now… and Don’t Stop

If you are already saving, whether it is for retirement or for some other reason, keep at it.  Saving is a great habit to start and keep.  If you are not saving for your retirement, or don’t even have a savings account, it is time to get started.  Make saving for your retirement a priority.  The sooner you start saving, the more time your money has to grow.

Know How Much You Will Need

It should come as no surprise that retirement is going to be expensive. Experts estimate that you will need at least 70 percent of your preretirement income.  If you earn relatively less than the average worker, you will likely need 90 percent or more to maintain your standard of living when it is time for you to stop working.

Have a Plan

If your employer offers it, contribute to your employer’s retirement savings plan.  The key to a secure retirement is to plan ahead.  Most employers offer a 401(k) and many times match the funds that you contribute.  If your employer offers a retirement savings plan, sign up for it and contribute as much as you can.  If you are fortunate enough to get a pay raise while employed, take the difference between your current pay and your new increased pay, and contribute that much more.  You can have your contribution taken directly out of your paycheck and put this part of your retirement savings on
“auto pilot”.

Leave it Alone

Once you have started to build your retirement savings, don’t touch it!  If you withdraw your retirement savings now, you’ll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.

Open an IRA (Individual Retirement Account)

According to the Department of Labor, “You can put up to $5,500 a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages.”

You have two choices when it comes to an IRA.  A traditional IRA or a Roth IRA. The tax handling of your contributions and withdrawals will hinge on on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. You can set it up so that an amount is also automatically deducted from your checking or savings account and deposited in the IRA.

Social Security Benefits

Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. You may be able to estimate your benefit by using the retirement estimator on the Social Security Administration’s Website.  Do not depend solely on being able to live off of your Social Security benefits.  With the economy in its current state and all of the talk of cuts to government spending, depending on your current age, there is no guarantee that Social Security will be around when your time comes to retire.

If you have doubts about having the ability to plan your retirement yourself, seek the advice of a professional retirement planner.  And remember… it is never too early or too late to start saving for your retirement.


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