Fewer than half of Americans have calculated how much they
need to save for retirement. The average American spends 20 years in
retirement. Putting money away for retirement is a habit we can all live with.
Start saving, keep saving and stick to your goals.
If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started and make it a priority.
Know your retirement needs.
Retirement is expensive. Experts estimate you will need about 70 percent of your preretirement income to maintain your standard of living when you stop working. Lower earners may need to have 90 percent or more of their preretirement income saved. Take charge of your financial future.
Contribute to your employer’s retirement savings plan.
If your employer offers a retirement savings plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy.
Learn about your employer’s pension plan.
If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit.
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. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return.
Don’t touch your retirement savings.
If you withdraw your retirement savings now, you’ll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.
Put money into an Individual Retirement Account.
You can put up to $5,000 a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages.
Find out about your Social Security benefits.
Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement.
Portions of article from dol.gov. It was published in the Founders FCU's Springtimers Times Newsletter (September 2012).