Does Your 401k Need Help?
For most Americans who have not started planning for their retirement,401k plans seem like a "good bet". One problem with this approach is the investor's reliance on employer matching for the plan. This may cause an employee to rely too much on the employer and not contribute enough to savings. Nothing will give you a wake up call like using a retirement calculator. You can find them on the internet from a variety of places. Retirement planning is hard, and it isn't something you just throw together unthinkingly.
Because there are so many variables in preparing a financial plan for retirement, the process can be difficult, at best, even when you are using a professional advisor. Some of these variables are: the age at which you retire, the age at which you start your savings, the amount you save for retirement, how much your retirement savings earn over the years and into retirement, how much debt you have, if any, at the age you plan to retire, and the quality of your health entering retirement and how long you live after retirement.
Government inflation of the money supply also means you have to account for inflation. That can be hard to do. There are many retirement calculators on the internet to help you though. What most of the calculators will show you, however, is that Social Security - for the most part - will not cover very much of your retirement. You will have to save a lot more money to have even a semi-comfortable retirement.
Recent history shows us that the economy will continue to grow, and with an inflation rate of about three to five percent, your investments are both growing and losing value at the same time depending on both of those rates.
Years ago our parents and grandparents, grew up in a time when a $50 a week wage was respectable income, and even during mid life that respectable income had quadrupled to $200 a week. But now, more than 50 years later, it would be foolish to expect to be able to live off $200 a week, and the $50 a week income is minor in today's economy.
If you make $500 or $1,000 a week, you can expect a similar phenomenon when you retire. A retirement calculator will show that you should have a retirement nest egg close to $1 million dollars to retire comfortably in 20 or 30 years.
One of the calculators tested showed shocking results: an adult starting with $100,000 adding $4,000 year to that would retire with nearly $900,000 but would end up broke by the time they were 85 years old!
Part of managing your existing income is being able to save money and still having access to it when you need it (sometimes hard to do inside a 401K), and still being able to invest for your retirement (though here, a tax deferral helps). Estimating your retirement income and expenses can be extremely difficult, however, there are many different sources of information and assistance available on the internet to get you started.
Because there are so many variables in preparing a financial plan for retirement, the process can be difficult, at best, even when you are using a professional advisor. Some of these variables are: the age at which you retire, the age at which you start your savings, the amount you save for retirement, how much your retirement savings earn over the years and into retirement, how much debt you have, if any, at the age you plan to retire, and the quality of your health entering retirement and how long you live after retirement.
Government inflation of the money supply also means you have to account for inflation. That can be hard to do. There are many retirement calculators on the internet to help you though. What most of the calculators will show you, however, is that Social Security - for the most part - will not cover very much of your retirement. You will have to save a lot more money to have even a semi-comfortable retirement.
Recent history shows us that the economy will continue to grow, and with an inflation rate of about three to five percent, your investments are both growing and losing value at the same time depending on both of those rates.
Years ago our parents and grandparents, grew up in a time when a $50 a week wage was respectable income, and even during mid life that respectable income had quadrupled to $200 a week. But now, more than 50 years later, it would be foolish to expect to be able to live off $200 a week, and the $50 a week income is minor in today's economy.
If you make $500 or $1,000 a week, you can expect a similar phenomenon when you retire. A retirement calculator will show that you should have a retirement nest egg close to $1 million dollars to retire comfortably in 20 or 30 years.
One of the calculators tested showed shocking results: an adult starting with $100,000 adding $4,000 year to that would retire with nearly $900,000 but would end up broke by the time they were 85 years old!
Part of managing your existing income is being able to save money and still having access to it when you need it (sometimes hard to do inside a 401K), and still being able to invest for your retirement (though here, a tax deferral helps). Estimating your retirement income and expenses can be extremely difficult, however, there are many different sources of information and assistance available on the internet to get you started.
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More Info: Only so much information can be covered in one article. If you would like more detailed information about any aspect of personal financial planning, please visit David's website.
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