Everyone shares some version of the American dream, whether it is an apartment in the city, a ranch house in the country, or a model home in the suburbs. Part of that dream is to quit the workforce at a relatively early age, with enough money in savings to enjoy your twilight years. Despite this being a common dream, it will not happen for many people. Here are two reasons to make sure it can happen for you, and to start planning for the end of your career now. |
Something Is Better Than Nothing
Due to poor retirement financial planning, or none at all, roughly one-third of all Americans have no savings for after they stop working. The most common form of savings for after leaving the workforce is a 401k. This is a tax-deferred account, designed to help people gradually build their nest egg through investments. Unfortunately less than half of the workforce utilizes a 401k. In some cases their job does not offer them that benefit.
Regardless of whether your employer offers a 401k, or how tight your financial position is, it is never too soon to start saving. If you simply saved $1,000 a year for forty years in an individual 401k, a conservative return would give you over $120,000 dollars. Investing $50 from each paycheck may not seem like a lot, but in the long run every little bit helps. In short, the more you save now, however little it is, the better off you will be later in life.
Retirement Is More Expensive Than You Think
If asked, most people could not tell you how much money they need to have saved so that they could leave the workforce for good. Retirement financial planning suggests the average household will spend just over $40,000 per year when all of its members are no longer working. This amount is for a very conservative lifestyle, with little in the way of travel or other luxuries. Social Security benefits usually only amount to roughly $15,000 per year.
This leaves a significant gap that needs to be made up through savings and investments. With the average American living longer, savings must be increased to ensure that accounts do not run out prematurely. A second aspect that makes leaving the workforce so expensive is the unforeseen costs that people encounter. With an abundance of free time there is an equivalent increase in entertainment costs per year. Medical expenses also increase substantially, to more than $5,000 per year on average. All of these extra expenses are on top of the cost of utilities, groceries, insurance, rent or mortgage, and travel.
In conclusion, retirement financial planning can be tough to prioritize. Most people have many other expenses, and retirement can seem very far away. However, it is not particularly hard to save for your later years. Putting away a small amount now can mean a comfortable life when you finish your career. Furthermore, life after work can be very expensive, with increased expenditures for entertainment and medical issues. Start planning now.
When considering retirement financial planning, Portland residents go to The Secure Retirement Group. To learn more, visit http://www.thesecureretirementgroup.com/.
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