| Why do I need to save for my retirement? After all, | | | | on your investments, the expected inflation rate |
| aren't the government and my company going to | | | | during retirement, the amount of pension and Social |
| provide for my retirement income? And, not only | | | | Security you expect, and other factors, you can |
| that, but I'll be making so much more money in the | | | | determine a plan of action that will sustain you as |
| future that I'll be able to make up for lost time then. | | | | long as possible. |
| It's sad that many Americans think that providing for | | | | Here are some of the factors that will affect the |
| their retirement is somebody else's responsibility. | | | | amount of retirement savings you accumulate and |
| Savings rates have declined over that past decade | | | | how long those investments will last. |
| and many people are pulling money out of their | | | | - Current annual income |
| savings just to make ends meet. | | | | - Percentage of your current income you invest for |
| But, that fact is that others are not preparing for | | | | retirement |
| your financial future. And, too many people | | | | - Number of years until you retire |
| themselves are failing to prepare financially for their | | | | - Percentage annual increase you expect in your |
| own retirement. | | | | annual earnings |
| The National Retirement Risk Index, prepared by | | | | - Percentage of your final earnings you'll spend if |
| Boston College's Center for Retirement Research, | | | | retired |
| indicates that 43% of households will fall short of | | | | - Amount of your pension and Social Security you |
| having 90% of the assets they need to maintain | | | | expect to receive |
| their lifestyle into retirement. Generation Xers are | | | | - Inflation rate during your retirement years |
| worse off with 49% not preparing adequately for | | | | - The amount you currently have invested for |
| retirement. | | | | retirement |
| Government is not the answer. The federal | | | | - Expected average growth rate of your |
| government is feeling the pinch of its overspending | | | | investments |
| habits. President Bush plans for the federal | | | | By entering various values into a retirement savings |
| government to spend about $2,885 more per | | | | calculator you can see how to improve your chances |
| individual taxpayer than it expects to receive in taxes | | | | for a successful and prosperous life as a retiree. |
| in 2007. About a quarter of your tax money already | | | | Let's look at an example. |
| goes to pay the interest on the national debt. Debt | | | | Suppose you are 25 years old, starting in a |
| payment is one of the fastest growing parts of the | | | | professional job at $50,000 a year with no savings |
| federal budget. | | | | and expect to see increases in your income and |
| Social Security is not in any better shape. All the | | | | inflation of about 4% a year. And you believe you |
| excess Social Security taxes now collected are spent | | | | can invest and get a tax free 8% rate of return. |
| by the government. They place IOUs in the form of | | | | You'll invest for 40 years and need about 60% of |
| bonds in the Social Security Trust Fund. The Trust | | | | your then current income for retirement living |
| Fund consists pieces of paper with promises to pay | | | | expenses. You'll consistently invest 8% of your |
| future benefits--no real assets. And, the Social | | | | income for retirement. |
| Security system is expected to start paying out | | | | At retirement you expect to receive an annual |
| more in benefits than it receives in taxes by 2017. | | | | pension from your company of $35,000 and Social |
| Businesses are also feeling the pinch of foreign | | | | Security of $20,000. |
| competition. Large corporations are increasingly hard | | | | You can expect, at age 65, after 40 years of earning |
| pressed to meet their promises to pay their retiree's | | | | and investing, that your retirement nest egg will be |
| medical care. Competition with foreign companies that | | | | about $1.765,658. That seems pretty good, but your |
| provide few employee benefits have forced some | | | | initial annual spending at retirement will be about |
| US companies to declare or threaten to declare | | | | $144,031. Overall, your investments will provide 29 full |
| bankruptcy in order to reduce employee | | | | years of inflation protected income before they are |
| compensation and benefits. | | | | depleted. At that time you will have to count on only |
| The stool with the three "legs" of retirement security | | | | your pension and Social Security, and drastically lower |
| (the government, your company, and you) is starting | | | | your standard of living. |
| to wobble. And two of those legs are getting pretty | | | | If you had saved 10% of your income instead of |
| weak. That gives you increased responsibility. | | | | 8%, your retirement nest egg would last 45 years. |
| If you retire at age 65, you will probably live for | | | | This small change would allow your investments to |
| another 30 or 40 years. You must prepare to provide | | | | carry you through the rest of your life. |
| a retirement nest egg that will help supply your | | | | You can see how minor adjustments in your |
| financial needs for at least 40 years. | | | | retirement preparation can make a significant |
| The best way to determine how to have a | | | | difference in your future standard of living. |
| successful retirement is to use a retirement savings | | | | The sooner you start using a retirement savings |
| calculator. This will show you the growth in your | | | | calculator to adjust your savings plan, the smaller the |
| retirement savings during your working years as well | | | | adjustments you'll need to make. There is no time |
| as the value of your savings during the years you | | | | like the present to help ensure a prosperous |
| withdraw money after retirement. | | | | retirement. |
| By adjusting how much you save, the rate of return | | | | |