Finance
Rethink the Way You Calculate Your Retirement Number
You may just pick a number and set that as your retirement number, but make sure that it is accurate.
You are facing either living on too tight a budget or outliving your money if you choose wrong. It is a vital decision that you need to make.
Financial experts and institutions are preaching the necessity of finding the right retirement strategy. No longer are retirees simply moving all their money into CDs -- retirement investment has changed.
Most traditional retirement plans rely on certain assumptions. It is assumed that at retirement the retiree will begin withdrawing a fixed amount of the savings, adjusting for inflation each year. The withdrawal may be a percentage of the portfolio or a fixed dollar amount. For example, when interest rates were last really high, many people simply lived off of the interest on their CDs.
Most advisors say that these assumptions are no longer effective. Partly because it was also assumed that employers or the government provided pension funds to retirees. However, those days have passed. With the increased lifespan of Americans and the disappearance of the pension system, many retirees are looking at outliving their resources.
Experts agree that most retirees should only withdraw 4% to 5% of their investment accounts each year. But there are those that say that 3% is a much safer number.
There are two things to remember when preparing for your own future retirement. One, Americans underestimate how long they will live in retirement. Two, many Americans overestimate the returns they will see on their investments.
If you are married and 65, you have a one in four chance of one of you living another 32 years. That is one-third of your life on retirement income.
Why are financial experts so gloom and doom about retirement? Because it is one of the most essential things you will ever save for. And it also requires quite a bit of knowledge. There are assets, investments, tax efficient methods and many other issues to be concerned with.
So many people simply assume that $1 million is the ideal retirement amount to have. It's not a bad thing to want to save $1 million in your lifetime. But not everyone will fit this number. Some people need far less and some need far more. You have to look at your situation -- your mortgage, your medical needs and your cost of living.
What can you do right now? Start saving for retirement. No matter how old you are, you should sit down and figure out what you will need in retirement. Make this your goal.
And educate yourself. There are so many different methods, reasonings and advice columns to follow. Remember that your retirement is based on your goals and objectives, no one else's. It isn't a cookie cutter situation.
Saving for retirement should be on every person's mind. Especially if you are narrowing in on 30. The longer you wait, the more you will have to sacrifice, now and in the future. If you need help deciphering all of the numbers, get it. Don't be ashamed to ask others for financial advice. It shows that you are wise and taking control of your future. Believe me, it will pay off in the end.
Martin Lukac (http://www.MartinLukac.com), represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! |
Martin Lukac
Tags: retirement, 401k, planning for retirement, stock market, stock portfolio, investing, 457, 403bSimilar articles
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