Review

retirement planning

Early Planning makes for a better retirement

Educational Material Provided by Manish Gandhi

Set, Ready Save –   We all have choices when it comes to being ready to retire.

The new wave of retirees includes Baby boomers.  They have better health care and are living longer, so financing a fulfilling post-career life has become a top priority.

Financial planning can be intimidating.

If you’re talking about retirement with a financial planner and you might hear how ill-prepared you are for retirement.

In this country, most people are not positioned well financially for retirement. The good news is there are several resources to help you change that, even if it means hearing some cold, hard facts.

Here are some hard statistics on how many of us have not adequately prepared. Counting on a Social Security check might be outdated. The time to start saving is now.

All the choice can be confusing for both employers and employees. Each plan there has its advantages and disadvantages.

What is the best plan for you?

Some scary statistics

Money Magazine provides a few overwhelming facts: One out of three employees have saved utterly zero dollars, towards retirement. Over 23 percent have less than $10,000 saved. Women have saved less than men, on average 63 percent reported no savings or less than $10,000 in retirement stashed away. Since women tend to live longer and many can live beyond what they put away in the bank (if anything).

Seniors have a similar story, only 25 percent of people age 55 and older have more than $300,000 saved for retirement. And 75 percentage 40-plus report they’re behind in retirement savings.

But, you ask, what about Social Security? Won’t that be enough to get you by?

Living on Social Security could be a stretch — the average monthly check is around $1,300 — it can be tough if you factor in basic costs of housing, utilities, food, and some health care. There’s not much leftover too, cover costs of, owning a car, traveling to visit grandkids, or simply go out to eat or see a movie without additional retirement income.

Unfortunately, more than 35 percent of baby boomers most often cited Social Security as their primary source of retirement income, according to a report from the Transamerica Center for Retirement studies. Meanwhile, Millennials and Gen Xers, who don’t seem convinced that Social Security will even survive the next 30 to 40 years, seem to favor 401(k) plans or IRAs.

Retirement plans? Which one is best?

Here’s the shocking truth: estimates across the country show — you — will need 70 to 90 percent of your pre-retirement income to maintain your current standard of living. So, if you make $40,000 a year now, you’ll need around $30,000 () to be “happy” after you quit the daily grind.

With today’s rising costs of living — particularly for food, housing, and health care — it isn’t always possible for a young, growing family to personally set aside up to 10 or 15 percent of their monthly income towards retirement. Their daily financial needs are too immediate and the retirement target is too distant, too nebulous.

That’s where employer-offered retirement plans can offer some relief. They’re not painless — you’re still contributing a set amount each paycheck towards the future — but their direct payroll deductions (you don’t have to think about it) and tax-free savings make them attractive options for workers of all ages.

The two most popular plans:

401(k) — You can choose a percentage of your paycheck to save, up to $18,000 for the year. You’re immediately vested, meaningfully involved and protected by the plan’s policies and federal regulations. Some employer plans allow loans or hardship withdrawals. Some plans include employer contributions.

IRA — Two forms of this plan, the simple deduction IRA, and the Simple IRA are each easy to set up, allow varying amounts of contributions and permit some withdrawals (which, you should know, are subject to being taxed). Contributions are immediately vested.

Of course, there are a handful of other retirement-saving options — including stocks and bonds, mutual funds, certificates of deposits, annuities (savings accounts provided by insurance companies), real estate and others.

Permanent life insurance – policies such as whole life insurance also contain an investment component, and that’s where things can get confusing. Some of the money paid into your whole life policy accumulates “cash value” in the form of a tax-sheltered investment account that the policyholder can borrow against. Insurance companies tout these policies as not only a way to leave a financial legacy to your heirs, but also as a good investment tool.

And, if you’re a government employee — working for schools, local PUDs, law enforcement, state agencies — then pensions are the way to go. Overall, four pension plans (with varying sub-plans) are offered through the state-administered Department of Retirement Systems.

Without exception, financial advisers recommend you start early — like NOW — to begin saving for retirement. The power of compounding, that snowball effect that happens when your earnings generate even more earnings, has huge benefits over the decades that mean a higher level of living for any retiree.

For instance, says website Business Insider, a retiree — let’s call her Chris — invests $5,000 annually between the ages of 25 and 65. In total, she invests $200,000 that, through compounding, grows to nearly $1.2 million by the time she retires.

This material was prepared by USA Social Marketing and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any investment.

 

 

Citations.

1 – https://www.nerdwallet.com/blog/insurance/whole-life-insurance-good-investment-strategy/  (5/23/16)

2 – https://www.wenatcheeworld.com/news/2017/sep/04/ready-set-save-business-owners-employees-have-options-when-it-comes-to-being-ready-for-retirement/ ( 9/3/2017)

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