| Action Group - Action Financial Management - Retirement Planning | |
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Retirement Planning When
should I start saving for retirement?
The sooner the better. If you start early enough, setting aside even a small amount each month can accumulate substantial savings in the long run because of the compounding of investment earnings. At age 35, if you began investing $200 a month at 8 percent for 30 years, until age 65, you would accumulate a retirement nest egg of $300,060 (before taxes). If you start 10 years earlier, the same compounded monthly investment would grow to 702,856! For every ten years that you delay setting aside money for retirement, you will have to save three times as much to reach your nest egg goal. Unfortunately, most people put off planning for their retirement until just before retirement. A study conducted by the US Department of Health and Human Services showed that 1 percent of the population retired wealthy, 4 percent were financially secure, 20 percent had to continue to work, and 49 percent relied on Social Security as their main source of income. Social Security, a pension, and a small savings account used to be enough because people lived only a few years beyond retirement. Now people commonly are retired 25 years or more. Retirement has become a whole new stage of life. The higher your pre-retirement income, the smaller the role of Social Security and a company pension plan. For people earning $60,000, for example, Social Security makes up only 34 percent of their income. The traditional rule of thumb says that people need 60 to 80 percent of their pre-retirement income to maintain their lifestyle after retirement. But that may not be enough if you plan to travel a lot or you anticipate high medical costs or other above average expenses. A Certified Financial Planner ™ professional can assist you with retirement objectives and calculate how much money you'll need to live on each month over your expected retirement lifetime (say to age 90 or even 100), taking into account taxes and inflation. The planner can then determine how much, if any, additional money you'll need to save through personal investments to fund that portion of your monthly income not provided by Social Security and your pension. |
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191 North Avenue, Mount Clemens, MI
48043 |