Where do you want to be during your golden years? Do you want to see the world? Buy that sports car you dreamed of? How about that retirement beach house? To start planning, write down your goals for retirement. Once you have decided on your goals, think about what you have to do to achieve them.
Many American workers anticipate an enjoyable retirement after years of the daily grind and commute. Traveling, golfing, relaxing by the pool...the possibilities seem truly endless. As workers daydream about the world of retirement, few venture to guess how much their retirement lifestyle might cost.
A 2013 study by the TransAmerica Center for Retirement Studies showed that about 50% of Americans are confident about retirement, the highest level of confidence since 2007. However, many of these savers may be too optimistic, considering that people live longer and face increased medical expenses and inflation. In fact, with medical advancements today, many retirees may be retired longer than they actually worked. Also, many people don't believe Social Security will be able to supply them with income during this time. With new changes on the horizon, retirees could see less and less of this money.
If you don't know your retirement goal amount, you are not alone. Many of those nearing retirement have not worked out the details of how their gains are supposed to provide for them; for example, according to the abovementioned study, only 12% of surveyed workers had a written plan for retirement. Many financial planners may tell you to estimate your needs at 70% of your current annual income. While this figure gives you a hard number, it could grossly misrepresent your plans for retirement. Your retirement finances are dependent on length of life, medical expenses, your retirement lifestyle and what you might need during those years.
Many savings options are available for your retirement nest egg. Most employers offer a savings plan such as a 401(k) or a 403(b). If you enroll in those programs, start investing a percentage of your pay into these plans. Individual Retirement Accounts (IRA) are another option. As of 2014, the maximum annual contribution to IRAs is $5,500 (or $6,500 for those age 50 and older). The limits will continue to increase because of the recent tax laws, and depending on your age, you may be eligible for a catch-up provision for increased contributions. If you ever change jobs, your earnings could roll over to your new employer's plan or into an IRA.
Whatever saving method you choose, the important thing is to start saving now. The earlier you save money, the more time your money has to grow.
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