You can start investing for retirement when you earn income for the first time. That’s when you can begin contributing to an individual retirement account (IRA). You can participate in retirement plans that your employers offer. If you work for yourself or own a small business, you can establish your own retirement plan. In fact, ideally, you’ll take advantage of several of these ways to accumulate retirement savings during your working life. These dedicated assets, in combination with your taxable investment accounts, Social Security, and an employer pension if you have one, are the foundation of a financially secure future.
In 1900, retirement wasn’t a hot topic. Employers didn’t offer pensions, there was no Social Security, and the average life expectancy was 50. More than a century later, everything’s changed. More than 44 million people collect retirement benefits, and that number is expected to reach 72 million by 2030. And people are living much longer: Current estimates suggest that a million or more people now in their 40s can expect to live to be 100 or more.
The truth is that retirement age is relative, not fixed. Some government workers retire after 20 years of service— sometimes as soon as their early 40s. Other people work productively through their 80s, thinking of retirement as something other people do. Many retire the first day they’re eligible. Still others leave work unwillingly, taking early retirement packages they can’t refuse.
What you do about retirement may fit one of those patterns or may be one you design for yourself. But whether retirement is a long way off or sneaking up on you faster than you care to imagine, planning for the future has three main ingredients: your financial security, adequate healthcare and benefits for your heirs.
One of the challenges of investing for retirement is trying to anticipate how much you need to accumulate. That’s the case in part because you can’t predict investment returns or future tax and inflation rates—which affect everyone— or more personal things like how long you’ll live.
If you’d like more direction than “save as much as you can,” you might use the rule of thumb that says you’ll ideally have savings equal to 25 times the amount you’ll need to withdraw from your accounts the first year you’re retired to supplement the Social Security and pension income you expect to receive. It’s a good place to start.
Lindahl has authored two books available on Amazon.com The Pros and Cons of Indexed Annuities and Retirement Reality Check.
Portions of this press release contain content from Lightbulb Press with permission.