It is an unfortunate fact that many Americans spend less time planning for their retirement than planning for their vacations. All it takes is intelligent planning and a clear understanding of the myths that hinder us from building a secure retirement.
Consider the following myths:
- Myth #1: I'm too young to worry about retirement.
You're never too young to make plans. The sooner you begin saving for retirement, the less you'll have to put aside. For example, if you want to have a $200,000 nest egg by age 65, you'll only have to save about $26 a week if you start at age 35. But if you wait until you're 55 to start, you'd have to put aside $233 every week.
(Both cases assume that your money is invested earning a hypothetical 9-percent return. This example is for illustrative purposes only and is not intended to reflect the actual performance of any security. Investing involves risk and you may incur a profit or a loss.)
- Myth #2: I won't need much to live on.
Many experts estimate that on average, to maintain your standard of living in retirement, you'll need 60 to 80 percent of your pre-retirement income. And that income has to continue to grow enough in an attempt to keep up with inflation.
- Myth #3: My kids will take care of me.
Most children want to lend their aging parents a hand, but many can't afford to. About the time you're ready to retire, they'll be paying their children's college tuition and saving for their own retirement. You'd be wise, therefore, to leave the kids out of your plans.
- Myth #4: Social Security will take care of me.
Although it's unwise to expect Social Security to cover all your costs, you can take steps to increase your benefits. Work as long as possible. You can start collecting Social Security at age 62, but your benefits may be reduced by 20 percent. If, on the other hand, you work until age 70 you'll receive even more.
- Myth #5: I can't afford to put money away where I can't touch it for many years.
The truth is, you can't afford not to participate in tax deferred retirement plans. Contributions to 401(k) and similar employer sponsored plans may reduce your current taxation. In addition, taxes are also deferred on earnings, so retirement savings have the potential to grow faster than others do. Best of all, many employers match all or part of your contributions to employer sponsored retirement plans, giving you money you would not otherwise have. The one drawback is that you may have to pay a 10-percent penalty, plus current income taxes, if you withdraw money out of a retirement plan before you're 59.5 years old.
[ALSO READ: A Tax Deferred is a Tax Saved]
What should you do? A comfortable retirement requires looking the facts squarely in the face & creating a realistic plan that works for you. Of course, this brief article is no substitute for a careful analysis of your personal circumstances. Before implementing any significant tax or financial planning strategy, contact your financial advisor, attorney or tax advisor as appropriate.
Does Your Family
Look Up To You
For a Secure Financial Future?
- Past Results
- Fee Schedules
- Investment Style
You may also be interested in...
By Justin Stoltzfus March 20, 2014 As financial experts sound the warning bells about the American retirement planning crisis, and how little the average worker has saved toward his or her golden years, all kinds of questions arise. What exactly do retiring workers have squirreled away to provide... more
By James O'Brien March 8, 2014 Despite a narrow brush with a new reduction to Social Security benefits, seniors will not see the proposed move to a more conservative cost-of-living adjustment, or COLA, in 2014. President Barack Obama's announcement on Feb. 2 that he was scrapping the... more
By James O'Brien By now, many investors and analysts have taken a look at President Obama's MyRA plan and drawn a reasonable conclusion: It won't get retirees through many years of post-work expenses. But then, that's not the MyRA's purpose. The federal government's newest retirement instrument... more
Millions of employees will change jobs this year through career moves, layoffs or retirement. If you are one of these employees, chances are that this change has left you with a lot to think about. And one important decision you need to make is what to do with your retirement savings. You have... more
In tax planning, the goal typically is to delay the payment of income taxes. Thus, it can be difficult to understand why it might make sense to convert a traditional individual retirement account (IRA) to a Roth IRA, which results in the current payment of income taxes. Factors that favor... more
Additional Retirement Planning Resources
- Find pre-screened advisors
- Review matched profiles
- Receive free consultation