Saving for Retirement




Your retirement years should be a time of peace, relaxation and comfort. Gone should be the days of worrying about finances, about bills, and about debts. Because social security cannot possibly provide sufficient money to give you the retirement lifestyle that you desire, you MUST make preparations NOW in order to ensure you'll be able to live the retirement life that you want.

Few people have started saving money -- no matter what the goal. Paying for college education of your kids, buying a house, going on an exotic trip, or getting the car of your dreams. Fewer still have started planning and saving for their retirement.

Why is this? Our retirement years are when we are most vulnerable. When we retire, we give up our jobs and the source of income that comes from working 9 to 5. We have to make do with what we've managed to save up, which, without proper planning, will be woefully insufficient for what we will need. We are also more likely to have an accident or get sick. How will we be able to pay medical bills if we have no insurance, and no money saved up?

You're never too young to plan for your retirement

It is never too early to plan for retirement. Even if you've just gotten out of school and you're in your first full-time job, now is the perfect time to plan for your retirement. Why? Because the longer you can save, the more money you'll have when you retire. Saving for retirement is one of the most important things we have to do. Putting it off until we're older merely means we'll end up with less money when we retire. Less money means a lower standard of living, and a more financially precarious existence.

Here's an example of why it is important to start saving for retirement as early as is possible. It is a fact that a person will have more money in his retirement account if he saves $3000 a year between the ages of 24 and 35 and lets the interest build up the remaining 30 years, than if he saves $3000 a year between the ages of 36 and 65, assuming a tax-free yield of 6% per year. Putting $36,000 away when you're young will mean a better retirement than if you put in $90,000 later on in life. It's called the "time value of money". Work it out sometime.

Don't procrastinate. Don't put off saving for retirement. If you donít start now, when will you start? When will you decide that it's a good time to start preparing? When you're young, you want to acquire things -- fancy car, big house, expensive "toys". If you wait until you've acquired all that you want to acquire, you'll never start saving for retirement. This may sound melodramatic, but the time to start planning for your retirement was yesterday. Or last month. Or the year before last.



Plan for your retirement

In order to know how much you'll need to save for your retirement, you need to decide now what kind of retirement lifestyle that you're going to want. Will you want to travel when you've retired? Or will you want to stay home and putter around with your friends? Will you want to be able to afford continuing to live in a big house, or will you trade down to a small condo in order to save money? Will you want to keep buying fancy cars, or will decide to make do with whatever you have when you retire?

Knowing what your desired retirement lifestyle is will help you determine how much you'll need to save. If you assume that you'll want to continue with the lifestyle that you already have, then you'll need to ensure that you'll be "earning" the same amount of money that you're making now. You might be able to cut back a little by assuming that you'll own your house outright by the time you retire. Better still, if you manage to pay off your mortgage before retirement, and you trade down to a small condo, the profit you make on selling your house will help provide retirement income. But don't rely on it. Save money now. It'll be much better to find yourself with more money than you need when you retire, than to find yourself unable to pay your bills or have an enjoyable lifestyle when retirement comes.

The bare minimum you'll need to have saved for retirement will be 12 times what it would cost to pay for the lifestyle you want. For example, if $30,000 a year is enough to live the way you want to when you retire, you'll need a minimum of $360,000 in your retirement account when you retire. If yields are about 6%, then $360,000 will give you about $30,000 per year for 20 years. If you retire at age 65, you'll be able to continue living your desired lifestyle until age 85.

How can I save that much money?

It seems rather daunting, doesn't it? And that is the bare minimum you should attempt to save by the time you retire. If investment yields average 6% per year, saving $3000 per year for 30 years should be enough. As you can see, if you start saving for retirement when you're young, it'll be much easier now, and it will allow you to have an even better retirement lifestyle than you planned for.

In order to save that much money, you need to do two things: budget your money (and strictly enforce the budget), and get out of debt now. Add up how much you have to pay each month on your credit cards, loans and lines of credit. I bet that the total is way more than $3000 a year. Get out of debt as quickly as possible, and you'll be able to save far more than you need for a comfortable enjoyable retirement.

Once you've gotten yourself out of debt, and you've learnt how to live on a budget, make sure to learn as much as you can on how to let your money work for you. Seek professional advice from financial advisors, bank officials and other retirement and investment experts to help you plan not only how much to save, but how to invest your savings to produce the best results. Remember to never dip into your retirement account. The money there is for your future -- it isn't there to buy a new car or a wall-sized television. "Borrowing" from your retirement money will certainly condemn you to living a retirement that is far less enjoyable than you would desire.

Plan for your retirement today. Start saving for retirement today. It is never too soon to start saving for retirement. Learn all that you can, and don't delay. Your future depends on it.




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