People do not think about how to support themselves when it
is time to retire until it is too late. I
laugh when people start talking about sports people wasting their money
thinking that their football careers will never end. The average worker thinks the same way. They forget that one day one or all of these
things will happen;
- The company that you are working for will close its doors, throwing you out of work.
- The company that you are working for is bought out moving the company to another state throwing you out of work.
- Your job is replaced by technology meaning that your services is no longer needed.
- The company is downsizing and you are the one being downsized.
All of these things happen at the most inopportune time.
This is why many people have nothing when it is time to retire and that is the
most optimistic scenario. Many people
work hard all their lives to find that they have only $800 per month from Social
Security and the rent is $850 per month.
About 2 in 10 American workers say they are "very confident"
about their retirement security. About 8
in 10 workers age 45 or younger can create a security net that will allow them
to meet their basic needs in retirement.
You can start a more secure security net by making sure that you are getting the most
out of your 401K and IRA savings accounts. Never open an IRA at a bank. Use a self
directed IRA account at a self directed online broker.
Retirement is basically your key to economic
independence. The first thing you must
do is find out where you are in your economic development toward retirement.
Methodology
The above link is a Retirement Calculator that estimates how much you'll need to save for
retirement. To make sure you're thinking about the long haul, we assume you'll
live to age 92.
But you could live to be 100 or incur large medical bills early
on in retirement that may raise your costs even further. Social Security is
factored into these calculations, but other sources of income, such as pensions
and annuities, are not. All calculations are pre-tax.
Did you run the
numbers?
Here is a retirement calculator. Put your age and the amount
you have saved for retirement so far in the calculator. If you plan to retire
at age 67 fine. If you plan to retire earlier than 67, put that number in the
chart.
Do you know that about half of
the people 45 years of age or younger have not tried to calculate how much they will need to retire? Running the numbers will give you a goal of
how much you need to retire safely.
In Part 2, we will discuss Employer Matching Funds.
