Money Sense
Step into a Secure Retirement
Planning for a secure retirement may feel like an overwhelming task, but when broken down into smaller steps it can become a reachable goal.
Here are five steps to get you started:
Step One: Estimate Income Needed
Financial experts estimate that you'll need 70% to 90% of your pre-retirement income to maintain your standard of living when you retire.
By calculating your retirement expenses now, you'll have a more realistic picture of how much you need to save.
Step Two: Start Early
The earlier you start saving for retirement, the greater earning potential your money will have through compounding (earning returns on top of returns).
Also, if your long-term goal of retirement is 30 or more years away,
your investments are in a better position to ride out market fluctuations.
There are ways to increase returns in a shorter period of time for those who don't have 30 years to wait on returns.
These will be covered in future articles.
Step Three: Research Saving Options
The possibility of achieving a secure retirement is greater when your investment selections are linked to specific objectives.
First outline your family"s financial goals and then factor in your investing timeline,
your tolerance for risk and your current financial situation.
Then consider the savings options available to you.
For example, if you have an employer-sponsored retirement plan at work, consider contributing the maximum amount allowed, especially if your employer makes matching contributions.
Individual retirement accounts (IRAs) are another good way to save,
whether you have a retirement plan at work or not.....note here.....these plans are tax deductible.
The interest earned on these types of accounts compounds faster because it is tax deferred.
Step Four: Invest for Growth
If you're a young saver and retirement is years away, you may be able to tolerate above average growth potential.
Or, if you find yourself close to retirement and need to supercharge your retirement savings,
you may want to invest more aggressively in investments with growth objectives.
Step Five: Monitor Your Plan
As you experience changes in your personal circumstances,
review your retirement savings plan to make sure your investment selections are still appropriate.
In addition, resist tapping your retirement savings for other financial needs.
We will discuss how you can use your money for collateral and still keep your CDs or IRA intact in future articles.
