Rocco Beatrice

Planning for Retirement: 7-Minute Guide



Posted: Wednesday, July 22, 2009

by
Estate Street Partners

It's never too late to begin saving for retirement. Many people think that if they are close to retiring, then it is too late to save. This is not true. It doesn't matter how old you are, you can always begin to save money for your retirement. The following tips will help you organize your finances before you leave the work force.

It is typically better to begin saving for retirement in your younger years. This will allow your contributions to grow and will provide you with more money when your reach the age of retirement. There is no way to know what you will need when you retire. Even if you feel confident about your retirement, chances are you will not have saved enough money to support your lifestyle. That is why it is so important to begin contributing to a retirement plan as early as possible. A recent study revealed that 60% of people in their 50s and 60s have experienced a job loss or an illness. This prevents them from earning money, thus preventing them from saving for retirement.

While you may think you have saved enough, here are some statistics that may make you think otherwise. More than 50% of workers in their 30s have retirement plans that have a value of $17,000. When they reach their 40s, 60% or workers have accounts with a $40,000 value. After the age of 55, most people have less than $100,000 in a retirement account. These savings are far from adequate, especially when you consider that you will be withdrawing 4 to 5% of the amount each year when you retire. To make matters worse, most retired individuals receive most of their income from Social Security, which averages at $1,150 per month. That is barely enough to live on.

It may seem like those retirement years are far in the distance, but it is so important to begin saving as soon as you can. It is recommended that the average worker should save at least 10% of their annual income for retirement. Most retirees will require 75% of what they were making in the workforce in order to continue living in the same manner. Young workers cannot rely on Social Security, so saving now is imperative!

There are many ways to save for retirement. Most employers will offer some type of retirement plan. Typically, it is a 401(k) plan. These will allow you to save around $16,500 per year. The amount increases annually and is based on your pre-tax income. If you are over the age of 55, you can save up to $22,000 a year with a 401(k). The advantage is that you will not have to pay taxes on the money until you begin to withdraw from the account.

IRA's are another way to save for retirement. The contribution limits are much lower with these. You can only contribute $5,000 per year. If you are over 55, the amount is raised to $6,000 yearly. Roth IRAs and Roth 401(k) plans are also available. These plans offer you the ability to save income that has already been taxed. This is a huge benefit later because you will be able to withdraw from the accounts without having to pay any taxes.

Even though you make contributions to a retirement plan that does not mean that is all you need to do. It is important to review your accounts each year. You can reallocate your investments to earn more money. Another thing to keep in mind when planning for retirement is to plan for the inevitable. Make sure to have a current list of all your assets. This will be a huge help if you should die. Always keep your list of beneficiaries current and have a living and traditional will.

Many of us have trouble looking ahead and planning for retirement. If you are in your sixties, it is time to focus on reality. You will be retiring soon and you want to make that transition as smooth as possible. It is advised to pick a date for retirement. This will help you determine if you will have the finances you will need. Make sure you know where you will be living and prepare a possible budget and make sure to put extra aside for health care.

If you have not yet begun to save and plan for retirement, don't panic. It's never too late. Situations can change daily and you never know what could happen. If possible, continue to work past the retirement age. This will allow you to continue to save for the day you do retire.

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