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The Helpful “Must-Knows” Of Retirement Planning
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By AI Editor
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The Helpful “Must-Knows” Of Retirement Planning
It’s said that human beings are differentiated from animals because of their capacity to plan. While this is true, many people find it challenging enough to plan something that’s due in six months, let alone plan a retirement bound in the distant future. The thing is, if you do not do anything today to guarantee your retirement, you will end up in a not so pleasant situation when living your older years.
Retirement comes with some very complicated decisions, and most of them come at one time. Nevertheless, when it concerns the most common facts about retirement, the rules can be quite simple. Here are some helpful “must-knows” to help you prepare for your future retirement:
Think future and not past
While your parents may have had a different type of retirement thirty years ago, be aware that yours will be very different in the future. You’ll be living longer, and having more of the active and “expensive” lifestyle. Think about how much you’ll need for your retirement for you to live comfortably. Consider your goals, when you must start, and what you need to do. Additionally, consider how much you’d be able to count on from your Social Security, and the costs you may run into when you’re actually retired.
Watch your own back
Do not allow your retirement to be on the common “three-legged stool” of Social Security, traditional pensions, and savings. If you rely on these three too much, there is a good possibility that it is going to crumble down. Why? Take a look at how every “leg” holds up to retirement:
Social Security
By 2004, the standard yearly Social Security benefit for retirement was about $11,000. For short, retirees won’t be able to live only on what their Social Security benefit will provide them. Do not expect it to change in the future. More and more baby boomers are retiring and putting strain on Social security,
thus it’ll have to be slashed down or taxes increased.
Traditional pensions
The amount you can receive from traditional pensions will depend on whether or not the company you work for provides one. Most usually don’t. If you’re among those with traditional pensions, then you will benefit based on the salary you have and the number of years worked for. In today’s mobile workforce, many do not stay long enough to gather significant benefits. The standard annual traditional pension benefit payout is not more then $10,000, plus most aren’t adjusted for the inflation during the past years.
Savings
This is the only leg you actually have control over. A personal savings can be as strong and as sufficient as you want it to be, and this decision will depend on you –“to save, or not to save”. The way you decide on this will have the greatest impact on your quality of life after retirement.
Start early in warming your nest of eggs
While you can brag about all of the factors that affect the size of your savings, it is always best to start early. There are three things that can significantly impact your retirement savings –how much is invested, the rate of return on investment, and number of years the investment was allowed to grow. Whatever the age, the sooner you begin your savings, the more the money and options you will have.
Take a mile instead of an inch
While the numbers of traditional pensions have declined over the years, there has been an increase in defined-contribution plans like 401(k), 403(b), and 457s. Contributions to these kinds of plans lower one’s taxable income dollar per dollar, so there’s an immediate cut on income tax bills. Additionally, the investments are tax-deferred, which means you do not pay any tax on its growth and income till the withdrawals are done in retirement. Leave the money to multiply throughout the years.
Retirement planning is not an easy task, but it can be more effective if you know what you’re dealing with. Plan ahead, and take control of your financial destiny after your retire.
Retirement comes with some very complicated decisions, and most of them come at one time. Nevertheless, when it concerns the most common facts about retirement, the rules can be quite simple. Here are some helpful “must-knows” to help you prepare for your future retirement:
Think future and not past
While your parents may have had a different type of retirement thirty years ago, be aware that yours will be very different in the future. You’ll be living longer, and having more of the active and “expensive” lifestyle. Think about how much you’ll need for your retirement for you to live comfortably. Consider your goals, when you must start, and what you need to do. Additionally, consider how much you’d be able to count on from your Social Security, and the costs you may run into when you’re actually retired.
Watch your own back
Do not allow your retirement to be on the common “three-legged stool” of Social Security, traditional pensions, and savings. If you rely on these three too much, there is a good possibility that it is going to crumble down. Why? Take a look at how every “leg” holds up to retirement:
Social Security
By 2004, the standard yearly Social Security benefit for retirement was about $11,000. For short, retirees won’t be able to live only on what their Social Security benefit will provide them. Do not expect it to change in the future. More and more baby boomers are retiring and putting strain on Social security,
Traditional pensions
The amount you can receive from traditional pensions will depend on whether or not the company you work for provides one. Most usually don’t. If you’re among those with traditional pensions, then you will benefit based on the salary you have and the number of years worked for. In today’s mobile workforce, many do not stay long enough to gather significant benefits. The standard annual traditional pension benefit payout is not more then $10,000, plus most aren’t adjusted for the inflation during the past years.
Savings
This is the only leg you actually have control over. A personal savings can be as strong and as sufficient as you want it to be, and this decision will depend on you –“to save, or not to save”. The way you decide on this will have the greatest impact on your quality of life after retirement.
Start early in warming your nest of eggs
While you can brag about all of the factors that affect the size of your savings, it is always best to start early. There are three things that can significantly impact your retirement savings –how much is invested, the rate of return on investment, and number of years the investment was allowed to grow. Whatever the age, the sooner you begin your savings, the more the money and options you will have.
Take a mile instead of an inch
While the numbers of traditional pensions have declined over the years, there has been an increase in defined-contribution plans like 401(k), 403(b), and 457s. Contributions to these kinds of plans lower one’s taxable income dollar per dollar, so there’s an immediate cut on income tax bills. Additionally, the investments are tax-deferred, which means you do not pay any tax on its growth and income till the withdrawals are done in retirement. Leave the money to multiply throughout the years.
Retirement planning is not an easy task, but it can be more effective if you know what you’re dealing with. Plan ahead, and take control of your financial destiny after your retire.