Lesson 4d: Retirement Planning
Have you thought about how much you need to save for retirement? If you have not, you can join the crowd. Most do not plan for retirement because it is too confusing, or they do not believe they will have enough to retire on, so why even try. Because most of us can expect to spend 25% to 33% of our lives (over 20 years) in retirement, it is never too early to start planning.
Many financial advisors suggest saving between 5% to 15% of your income for retirement. However, this advice does not usually factor in individual circumstances, such as the company retirement plan, the presence of a spouse, or the number of years to save before retirement. It is important to plan for retirement based on your own specific situation. For example, a high wage earner with no company retirement plan may need to save more than 15% while a low wage earner with a generous company pension plan may only need to save 5%.
A main reason to start planning now to save for retirement is the growing trend to shift more and more of the financial risks of retirement to individuals:
Relying less on retirement savings plans (e.g., 401(k) plans or the proposed Social Security savings plan) means individuals are taking on more financial/investment risk with their retirements. If the stock market does not perform up to expectations, you will need to do more to ensure your financial security in retirement.
How should you start?
Sounds like a lot of work? With today's retirement calculators, an estimated calculation for someone before age 50 could take less than 15 minutes. For those older than age 50, a more precise calculation is needed and may take up to an hour or two. The next section discusses the risks in retirement in more detail along with providing a few links to retirement calculators to help you figure out how much you need for retirement.
|Financial Topic : Planning - Retirement (continued)|
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