Is Your 401k Plan Going To Be Enough?
Employer 401k plans are a popular tool used for retirement planning. A serious problem with 401K plans 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. Most Americans have no idea how much money they should be saving. If you have never used one, a retirement calculator will probably leave your jaw on the floor in amazement. Planning for retirement is a difficult task and cannot be taken lightly.
Even if a professional financial planner is helping you, the financial planning process is hard. There are a lot of variables. The age you want to retire at, when you start saving money, how much you save, and the interest rate you earn are just some of the many considerations you have to think about. One of the biggest concerns may be your health when entering retirement and how long you live after you retire.
Perhaps the most difficult thing to plan for is inflation. Inflation is caused by Government printing currency. Because that changes from administration to administration, it's hard to predict what policy will be 20 or 30 years from now. On the internet there are dozens of retirement calculators available, and there is a lot of information and ideas on how to plan for this. Some of them seem more plausible than others. In as far as retirement calculators go, what most of them will show you is that you simply cannot rely on Social Security. Even if you do, you will still need to save a substantial amount of money just to maintain something resembling a pre-retirement standard of living.
The economy will probably recover, and continue to grow. However with inflation at anywhere between three and five percent, you are going to be gaining and losing value in your investments based on how much your savings is being eroded.
Your parents and grandparents may have grown up in a time when a $50 a week wage was normal. Now, however, that's completely unrealistic. More than 50 years later, there is no way you could expect to live off $200 a week.
So, today's wage earners making $500 to $1,000 a week in income can expect similar changes when they reach retirement age. Today's calculations will show wage earners that they should expect to have a retirement nest egg of close to $1 million dollars to retire comfortably in 20 or 30 "Retirement Calculator" years.
One calculator tested online showed that an adult starting with an assets of $100,000 and adding $4,000 year to that nest egg would enter retirement with almost $900,000 but still be bankrupt by 85.
An essential part of managing your existing income is setting aside and investing funds for your retirement. Despite the difficulty of estimating your retirement income and expenditures, there is a wealth of assistance available on the internet to get you started, and professional advisors ready to help when needed.
Even if a professional financial planner is helping you, the financial planning process is hard. There are a lot of variables. The age you want to retire at, when you start saving money, how much you save, and the interest rate you earn are just some of the many considerations you have to think about. One of the biggest concerns may be your health when entering retirement and how long you live after you retire.
Perhaps the most difficult thing to plan for is inflation. Inflation is caused by Government printing currency. Because that changes from administration to administration, it's hard to predict what policy will be 20 or 30 years from now. On the internet there are dozens of retirement calculators available, and there is a lot of information and ideas on how to plan for this. Some of them seem more plausible than others. In as far as retirement calculators go, what most of them will show you is that you simply cannot rely on Social Security. Even if you do, you will still need to save a substantial amount of money just to maintain something resembling a pre-retirement standard of living.
The economy will probably recover, and continue to grow. However with inflation at anywhere between three and five percent, you are going to be gaining and losing value in your investments based on how much your savings is being eroded.
Your parents and grandparents may have grown up in a time when a $50 a week wage was normal. Now, however, that's completely unrealistic. More than 50 years later, there is no way you could expect to live off $200 a week.
So, today's wage earners making $500 to $1,000 a week in income can expect similar changes when they reach retirement age. Today's calculations will show wage earners that they should expect to have a retirement nest egg of close to $1 million dollars to retire comfortably in 20 or 30 "Retirement Calculator" years.
One calculator tested online showed that an adult starting with an assets of $100,000 and adding $4,000 year to that nest egg would enter retirement with almost $900,000 but still be bankrupt by 85.
An essential part of managing your existing income is setting aside and investing funds for your retirement. Despite the difficulty of estimating your retirement income and expenditures, there is a wealth of assistance available on the internet to get you started, and professional advisors ready to help when needed.
About the Author:
David Lewis, RFA is a professional financial adviser. If you would like more detailed information about any aspect of personal finance, please visit David's website.
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