Know your retirement needs. Retirement is expensive. Experts estimate you’ll need about 70% of your preretirement income – lower earners, 90% or more – to maintain your standard of living when you stop working. Understand your financial future.
Find out about your Social Security benefits. Social Security pays the average retiree about 40% of pre-retirement earnings.
Learn about your employer’s pension or profit sharing plan. If your employer offers a plan, check to see what your benefit is worth. Most employers will provide an individual benefit statement if you request one. Before you change jobs, find out what will happen to your pension. Learn what benefits you may have from previous employment. Find out if you will be entitled to benefits from your spouse’s plan.
Contribute to a tax-sheltered savings plan. If your employer offers a tax-sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more and automatic deductions make it easy. Over time, deferral of taxes and compounding of interest make a big difference in the amount of money you will accumulate.
Ask your employer to start a plan. If your employer doesn’t offer a retirement plan, suggest that it start one. Simplified plans can be set up by certain employers.
Put money into a Traditional Individual Retirement Account, Roth IRA account. Currently , a person is able to contribute $5,500 ($6,500 if you’re age 50 or older) or your taxable compensation for the year, if your compensation was less than this dollar amount. If you don’t have a retirement plan (or are in a plan and earn less than a certain amount), you can also take a tax deduction for your IRA contributions.
Don’t touch your savings. Don’t dip into your retirement savings. You’ll lose principal and interest, and you may lose tax benefits. If you change jobs, roll over your savings directly into a Rollover IRA or your new employer’s retirement plan.
Start now, set goals and stick to them. Start early. The sooner you start saving, the more time your money has to grow. Make retirement saving a high priority. Devise a plan, stick to it and set goals for yourself. Remember, it’s never too late to start. Start saving now, whatever your age.
Consider basic investment principles. How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your pension or savings plan is invested. Financial security and knowledge go hand in hand.
Ask questions. These tips should point you in the right direction, but you’ll need more information. Talk to your employer, your bank, your union or a financial advisor. Ask questions and make sure the answers make sense to you. Get practical advice and act now.
Sources of Retirement Income
Retirement income can come from a variety of sources.
Employer – Sponsored Retirement Plans
If your employer offers a plan, you can benefit greatly by participating in the plan. Employer-sponsored retirement plans are usually a part of the employees’ benefit packages, but are an overlooked savings tool. Review these documents, a major source of income during retirement.
Personal savings will probably fund a large portion of your retirement. Money in savings accounts, money market accounts or funds, stocks, bonds and mutual funds are sources for your personal savings. IRAs, both traditional and Roth (after-tax) are non-employer sponsored accounts that offer tax advantages when saving for retirement.
Social Security Retirement Benefits
Social Security retirement benefits will not replace your pre-retirement income. However, it is the largest source of retirement income for many American. Deciding when to take social security is an important decision. Visit http://www.ssa.gov for more information. If you plan to continue to work, at least part time after you retire, your Social Security benefits may be reduced if your earning exceed a certain amount.