Are You Ready—for Retirement?

It's never too early (or too late) for couples to plan for their financial future.

Scott Kays

Average Rating: Not rated

[0 Comment]

There are no previous pages

1 of 6

Retirement. It sounds like such a long way off; why worry about planning for it now? After all, just paying the bills and putting food on the table is tough enough for most of us. Plus, there will be plenty of time to save for retirement after the kids are gone, right? Unfortunately, this is normally not the case. In fact, when preparing for your golden years, time is your biggest ally.

Surveys consistently show that only 4 to 7 percent of those who retire each year are financially independent. Other couples must depend on Social Security, relatives, welfare, or other charitable means to live. Poor planning is the primary culprit for this sad statistic. Conversely, good planning can make retirement years some of the best years of your lives.

Why do people fail to prepare adequately for retirement? Most do not understand its importance, and they lack the basic knowledge to plan properly.

Very simply, all retirement planning centers around two key elements: (1) Saving enough and (2) Investing your savings properly for a good return. Many factors are involved in each of these elements, but they represent the essence of retirement planning.

Saving Enough

There were days when the average worker retired at age sixty-five and died at seventy-three. Planning for eight years of retirement was not an ordeal. Between Social Security and a generous pension from a company for which they had worked over thirty years, the need for personal savings was minimal.

Things are much different today. The employee who works for one company most of his life and earns great pension benefits is becoming a character in a history book. Due to leaps in the medical field, average lifespans are increasing at a dramatic rate. At the same time, many people now opt to retire at ages well below sixty-five, meaning that an increasing percentage of workers will find themselves retired for longer than they worked. The need for good planning is greater today than at any time in our history.

To determine how much you need to save in preparation for this phase of your life, you must first determine your retirement income needs. There is no right or wrong answer here, but, assuming your house is paid for, a good rule-of-thumb is that you will require about 70 percent of your pre-retirement annual income to maintain your lifestyle.

What sources of income will be available to meet this need? Social Security will most likely be around in some form; so you should be safe counting on some income from it. A company pension is also a possibility, but, if you are like many of today's mobile workers, it may not be much.

The final source of retirement income is the most important and the one over which you have the most control—personal savings! One of the most important disciplines you can develop is setting aside a percentage of every paycheck into an investment account designed to provide you with income at your retirement. Individual Retirement Accounts (IRAs) are designed to help individuals save money specifically for their retirement years on a tax-deferred basis. Individuals are allowed to contribute up to $2,000 per year into an IRA. Money that would normally have been taxed as investment income is not taxed until it is withdrawn from the IRA, which may not be for many, many years.

next page... |

There are no previous pages

1 of 6

Originally published in: Marriage Partnership, 2000, Winter

More from Scott Kays:
Kyria.com | Books

Join the Kyria.com Community!

Become a member to have access to the following:

Full access to the bimonthly Kyria digizine, each issue focusing on a spiritual discipline or theme
50 percent discount on all of the downloadable resources in the Kyria Store
Hundreds of members-only articles for thoughtful, influential women