How early did you start saving for retirement?

By ( – No one is suggesting it’s easy for someone in their 20s to imagine retirement but the day does come. With life expectancy increasing all the time it is reasonable to suggest that healthy people can expect 20 years in retirement. For those 20 years there’s no monthly pay check. You have to create your income from the actions you take while you were working and that means saving and investing for retirement. If you begin in your 20s and save regularly you’ll have 40 years to make suitable provisions; for every year you delay saving for retirement, time becomes an increasing enemy.

The sooner you begin saving in a tax deferred account the better. The point is that best estimates suggest that you’ll need 80% of your earned income at retirement to fund your lifestyle in the following years. That may be two decades or even more. That 80% may be on the high side if you don’t intend to travel extensively or want to pursue expensive past times. You can do your own calculations on what you might need and then determine what you’ll have to have in your retirement fund to provide it. Social Security will provide a certain amount but the System is in trouble. Estimates suggest that without a significant injection of funds benefits will fall by up to 25% by 2030.

Make Your Calculations

If you’re going to live for 20 years after you retire you’ll not be able to take 10% of your fund out each year. It’s more like half of that, even less, so if you think you know how much you will need to live on you can soon calculate how big a fund you will need. Social Security will rarely provide more than $20,000 and the average is nearer $12,000. If you think you will need $50,000 a year and you estimate you will get $15,000 from Social Security then you have to take $35,000 from your fund each year. If that represents 5% of your fund you will need to start with $700,000.

There are several variables to consider throughout a career. Growing income is positive but redundancy remains a possibility. It is fair to make an assumption that you should never be out of…



Read the complete article here.