Taking the Mystery Out of Retirement Planning Part 1
by Gloria Towolawi | Aug 13 ,2012 1:15 am
Planning For a Lifetime
It’s not going to be your parents’ retirement – rewarded at 65 with a gold watch, a guaranteed pension, and health insurance for life. For many Americans, retiring in this new century is a mystery. Earlier generations of workers could rely on employer-provided pensions, but now many workers will need to rely on their own work-related and personal savings plus Social Security benefits. These savings have to last longer because Americans are living longer, often into their eighties and nineties.
If you are one of those people who want to plan – and are about 10 to 15 years from the day you retire – this topic is for you. Today’s and tomorrow’s retirees may well have a new kind of retirement. With a longer and healthier life span, bikes, boats, planes, and RVs may be part of your life, because you are more likely than previous generations to be an active older American.
Opportunities to take courses, start a new career, and become a volunteer can make your future an adventure. A longer life, however, will also mean more medical care, some of which will not be covered by the federal Medicare program.
The whole retirement scene has changed and many American workers find it a mystery. In fact, a 2011 survey by the Employee Benefit Research Institute EBRI suggests that only 42 percent of Americans have tried to calculate how much they need to save for retirement. Each topic in this series will give you clues on how to take control of your finances so that when you retire, you have the time and money to do what you’ve always wanted. For some, it’s simply being with friends and family. For others, it’s starting a new hobby or craft. And for some it’s starting a new life.
Whether you are 10 years from retirement or have a different timeframe – or even if you are retired – this topic will help you to unravel the financial mysteries of life after work and to discover changes you can make for a financially secure future.
Time on Your Side
Getting started today will help you put time on your side. To help, Taking the Mystery Out of Retirement Planning offers a simplified, bottom-line approach to figuring out just how much you may need when you retire. The worksheets in this series will provide a guesstimate. Regard them as a starting point.
Each topic in this series asks you to chart a different part of your financial life – your savings and your expenses – and helps you project future costs and savings well into your retirement years. Of course, no one has a crystal ball, and life has a way of throwing changes our way. But getting time on your side now, before you retire, means you will not be awake at 3 a.m. worrying about, instead of planning for, the future.
|Clue 1 Timeline For Retirement|
At age 50
|Begin making catch-up contributions, an extra amount that those over 50 can add, to 401(k) and other retirement accounts.|
|No more tax penalties on withdrawals from retirement accounts, but leaving money in means more time for it to grow.|
|The minimum age to receive Social Security benefits, but delaying means a bigger monthly benefit.|
|Eligible for Medicare.|
|Eligible for full Social Security benefits if born between 1943 and 1954.|
|Start taking minimum withdrawals from most retirement accounts by this age; otherwise, you may be charged heavy tax penalties in the future.|
The General Information Worksheet will get you started thinking about when you will retire. This information will be used in the worksheets that follow to help you come up with your retirement savings. Next week’s topic is Tracking Down Today’s Money.
Courtesy: U.S. Department of Labor Employee Benefits Security Administration