Retirement Security

How much retirement income will I need?

An easy rule of thumb is that you’ll need to replace 70 to 90 percent of your pre-retirement income. If you’re making $50,000 a year (before taxes), you might need $35,000 to $45,000 a year in retirement income to enjoy the same standard of living you had before retirement.

Think of this as your annual “cost” of retirement. The lower your income, generally the higher the portion of it you will need to replace. However, no rule of thumb fits everyone.

Expenses typically decline for retirees: taxes are smaller (though not always) and work-related costs usually disappear. But overall expenses may not decline much if you still have a home and college debts to pay off. Large medical bills may keep your retirement costs high.

Much will depend on the kind of retirement you want to enjoy. Someone who plans to live a quiet, modest retirement in a low-cost part of the country will need a lot less money than someone who plans to be active, take expensive vacations, and live in an expensive region.

For younger people in the early stages of their working life, estimating income needs that may be 30 to 40 years in the future is obviously difficult.

At least start with a rough estimate and begin saving something — 10 percent of your gross income would be a good start. Then every 2 or 3 years review your retirement plan and adjust your estimate of retirement income needs as your annual earnings grow and your vision of retirement begins to come into focus.retiring at 55 today is high — 64 percent for a man and about 75 percent for a woman.

These are average figures and how long you can expect to live will depend on factors such as your general health and family history. But using today’s average or past history may not give you a complete
picture. People are living longer today than they did in the past, and virtually all expert opinion expects the trend toward living longer to continue.

How To Prepare For Retirement When There’s Little Time Left

What if retirement is just around the corner and you haven’t saved enough? Here are some tips. Some are painful, but they’ll help you toward your goal.

• It’s never too late to start. It’s only too late if you don’t start at all.
• Sock it away. Pump everything you can into your tax-sheltered retirement plans and personal savings. Try to put away at least 20 percent of your income.
• Reduce expenses. Funnel the savings into your nest egg.
• Take a second job or work extra hours.
• Aim for higher returns. Don’t invest in anything you are uncomfortable with, but see if you can’t squeeze out better returns.
• Retire later. You may not need to work full time beyond your planned retirement age. Part time may be enough.
• Refine your goal. You may have to live a less expensive lifestyle in retirement.
• Delay taking Social Security. Benefits will be higher when you start taking them.
• Make use of your home. Rent out a room or move to a less expensive home and save the profits.
• Sell assets that are not producing much income or growth, such as undeveloped land or a vacation home, and invest in income-producing assets.

First, add up the approximate value of all your assets. This includes personal possessions, vehicles, home, checking and savings accounts, and the cash value (not the death benefits) of any life insurance policies you may have. Include the current value of investments, such as stocks, real estate, certificates of deposit, retirement accounts, IRAs, and the current value of any pensions you have.

Now add up your liabilities: the remaining mortgage on your home, credit card debt, auto loans, student loans, income taxes due, taxes due on the profits of your investments, if you cashed them in, and any other outstanding bills.

Subtract your liabilities from your assets. Do you have more assets than liabilities? Or the other way around? Your aim is to create a positive net worth, and you want it to grow each year. Your net worth is part of what you will draw on to pay for financial goals and your retirement. A strong net worth also will help you through financial crises.

Review your net worth annually. Recalculate your net worth once a year. It’s a way to monitor your financial health.

Identify other financial resources. You may have other financial resources that aren’t included in your net worth but that can help you through tough times. These include the death benefits of your life insurance

Here are some retirement tips recommended by the IRS.

Set a goal – “I think I can save $ 25 per paycheck.” It is easy to defer to create a “pain” payroll deduction for savings. No matter if the money goes to a 401 (k) plan, an IRA or a regular account, the former savings, just start saving. You can start with a small amount and increase whenever circumstances permit – like when you get a raise, your car payments end, you get a bonus. Pay yourself now, you’ll thank yourself later.

Open an IRA – IRAs are readily available and easy to contribute and easy to save with. Most Americans can establish an IRA – either a traditional IRA or a Roth IRA – and save on taxes. Learn more about IRA from your bank or financial institution or the resources listed elsewhere on this site.

Learn about your employer’s retirement plan – If you are covered under the retirement plan your employer, your employer must give an explanation in plain language of the plan called a “summary plan. It describes their rights under the retirement plan. For a summary of the plan, ask the plan administrator or your employer.

Individual examination of its Statement of Benefits - Your individual benefit statement shows your total plan benefits and the amount corresponding, or all of your property. For an individual benefit statement, ask your plan administrator or employer.

Register for the 2009 401 (k) – If you are covered under a 401 (k) plan, you may have to designate the amount of money they want out of your pay and contributed to their 401 (k) account at the end of 2009 . The 401 (k) limit is $ 16,500 for 2009 ($ 22,000 if you are 50 years or older in 2009).

Take Your Required Minimum Distributions – If you are 70-1/2 are usually required to receive a minimum amount of your qualified retirement plan or IRA this year.

Check your Social Security Statement – The Social Security Administration, probably sends you a Social Security Statement each year about three months before your birthday. This statement is his personal history on the income which they have paid Social Security taxes and a summary of the estimated benefits you and your family may receive as a result of those earnings. These benefits include retirement benefits and protection if you become disabled or die before retirement age. For more information and to apply for a Social Security Statement, go to Social Security Benefits.

More information about the retirement of your spouse – Many retirement plans provide benefits for spouses. For example, your spouse’s plan may provide that you will receive an annuity unless you consent to the distribution otherwise. Before signing, read and understand any waiver or consent forms for retirement plan distributions from your spouse.

Planning for Retirement While You Are Still Young
Who really thinks of retirement when they are young? Not many of us. Yet there are some crucial reasons to start preparing now for retirement.
You’ll probably have to pay for more of your own retirement than earlier generations. The sooner you get started, the better.
You have one huge ally — time.

Let’s say that you put $1,000 at the beginning of each year into an IRA from age 20 through age 30 (11 years) and then never put in another dime.

The account earns 7 percent annually. When you retire at age 65 you’ll have $168,514 in the account.

A friend doesn’t start until age 30, but saves the same amount annually for 35 years straight. Despite putting in three times as much money, your friend’s account grows to only $147,913.

You can start small and grow. Even setting aside a small portion of your paycheck each month will pay off in big dollars later. Company retirement plans are the easiest way to save. If you’re not already in your employer’s plan, sign up.

You can afford to invest more aggressively. You have years to overcome the inevitable ups and downs of the stock market. Developing the habit of saving for retirement is easier when you are young.