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Planning
for Retirement
Living your retirement years in style is a dream of many Americans. It's a time
to step back and enjoy the rewards of your hard work. Whether your dreams
include a house by the beach, traveling the country, or simply enjoying the
hobbies you've never quite had enough time for, your chances of making your
retirement dreams come true will substantially increase if you make smart
financial decisions. Making sure your spouse is financially secure if something
should happen to you is just as important. Here is some information to help you
start planning for your retirement years:
How much will I need to retire?
How will I fund my retirement?
How much will I need to retire?
Most financial planners agree that you should use your current annual income as
a basis for planning your retirement. To live comfortably in retirement, you
should plan on having enough income each year to equal 70% to 80% of your
current annual income. Keep in mind that inflation and promotions will factor
in to how much your current salary may change in the years to come. So make
sure to plan your retirement income as a percentage of your increased earnings
in the years leading up to retirement.
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How will I fund my retirement?
Retirement funding typically comes from a variety of sources. Depending on the
age you retire, Social Security and company funded pension plans may provide
you with some income. It is unlikely, however, that those two sources will meet
your financial needs. For example, a person who currently makes $35,000 a year,
will need almost $700,000 in savings to support his or her retirement, beyond
what Social Security and the company funded pensions will provide. Saving
through your company's 401(k) plan, through Individual Retirement Accounts
(IRAs) and other tax-favored retirement plans is a great way to reach your
goals. Plus, it is important to plan for the potential loss of retirement
income used to support your spouse if you should die. Understanding the
benefits paid from your retirement sources, such as Social Security, company
funded retirement plans and annuities can help you ensure that adequate
financial resources are available. Life insurance can provide a valuable source
of funds to help offset any loss of income in these situations. Consult your
financial advisor for more information on planning your retirement.
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