Does Your Employer 401k Need Help?
Individual 401k plans are a popular tool used for retirement planning. One 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 shouldn't 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.
If the economy is able to grow enough to outpace inflation, your investments must be able to keep up. Even still, with inflation running 3%-5%, your investments are losing value and struggling to keep up.
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.
Average Americans making $500 to $1,000 per week today will see the same kind of results that their parents and grandparents are seeing now, unfortunately. The retirement calculators are showing that they should have a retirement nest egg of close to a million bucks if they want to retire comfortably for 20-30 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.
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.
If the economy is able to grow enough to outpace inflation, your investments must be able to keep up. Even still, with inflation running 3%-5%, your investments are losing value and struggling to keep up.
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.
Average Americans making $500 to $1,000 per week today will see the same kind of results that their parents and grandparents are seeing now, unfortunately. The retirement calculators are showing that they should have a retirement nest egg of close to a million bucks if they want to retire comfortably for 20-30 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: There is only so much information that can be covered in one article. If you want more information about any aspect of financial planning, please visit David's website.
posted by Credit Counseling at
11:04 PM
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