Saving for Retirement, A Financial Warmup
Just as you would warm up before you run or play a sport, you should also warm up (figure out) a savings plan for retirement. Most of us believe our largest lifetime expenditure is our home but that actually isn't the case. The biggest ticket item isn't your home - it's your retirement.
Buy your retirement? That's right, you save money today to be able to retire in the future. When you start saving, how much you save and what investment decisions you make all determine what kind of retirement you'll have and when you retire. Saving for retirement these days is harder than it used to be for a number of reasons.
Savings rates and interest rates have been very low for years now. Currently the highest savings account rates are at 1.00 percent and low rates make saving for retirement even harder. Major stock indices have either just made or are near a record high, so chances are if you're invested in stocks for the short term, you may have actually done well.
Although stock prices have moved higher the past several years, if you've been invested in stocks for a longer period of time you might actually have just broken even again. Returns on investment (ROI) have been lacking the past decade which has put off retirement for millions of hopeful retirees.
Another major factor for consideration when retiring is longevity. Life expectancy is getting longer, which means we'll need more money so our retirement nest egg lasts as long as we do. For most people retiring today and in the future, Social Security and retirement accounts are their only projected sources of income. Gone are the days when you could rely on a pension to fund your retirement.
Income from Social Security is also questionable in the future, because very soon there will be more retired people getting benefits (taking out) than people working (putting money in). You would look to Social Security as a supplemental income, not your main source of income in retirement.
A slight majority of Americans are earning some kind of retirement benefits from work, usually with a 401k plan. Unfortunately, a majority of Americans don't take an active role in managing their retirement account. A good percentage also just have the account in a money market account, which earns nothing instead of investing in mutual funds.
Taking all of these things into consideration, you must take charge of your retirement plan today to ensure you reach your retirement goals. The task isn't as hard as it might seem - you don't have to make all the investment decisions, you can leave that to reputable professionals.
The sooner you start your retirement plan, the better off you'll be.
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