Simple Steps on the Road to Retirement
Most Americans realize the importance of planning
for retirement. If your goal is to have a secure
retirement, you need to take charge today and
develop a sound plan of action. Here are some
important points to consider:
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Review your current financial situation by assessing your income
and assets versus your expenses and liabilities.
Determine a realistic amount to contribute regularly to your
employer-sponsored qualified retirement plan, e.g., a 401(k) plan.
Over time, try to maximize allowable contributions to your savings
plan and take advantage of the company match, if offered.
In 2014, you can contribute up to $5,500 into a traditional Individual
Retirement Account (IRA) or Roth IRA. If you are age 50 or older,
you can contribute an additional $1,000. Depending on your
participation in other qualified plans, contributions to a traditional
IRA may be tax deductible. Earnings for both traditional and
Roth IRAs have the potential to grow on a tax-deferred basis.
Work toward reducing your debt. Pay off large bills as soon as
possible. Curb your spending to avoid taking on any new debt
that could carry over into retirement.
Consult with a qualified professional about your life, health, and
disability income insurance policies to determine the amount of
coverage for your current and future needs.
Find out how much you can expect to receive in retirement from
pension plans, veterans’ benefits, or Social Security. To get an
estimate on your future Social Security benefits, visit
www.socialsecurity.gov.
Analyze which expenses are likely to decrease after you retire
(clothing, commuting, etc.) and which are likely to increase
(medical, travel, etc.), and plan accordingly.
If you adhere to your checklist, you may see your
savings increase as you get closer to reaching your
retirement income goals. Remember, it is never too
early to start planning for your future.
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Inflation and
Your Retirement
Even if your retirement is years away, it’s
important to understand how inflation can
affect your retirement savings. You probably know that inflation can depreciate
your savings over time. But, how seriously
do you consider the impact of a decrease
in the purchasing power of your money on
your future plans? At 3% inflation, $100
today will be worth only $67.30 in 20 years,
which is a loss of one-third of its value.
Therefore, in order to outpace inflation,
your long-term retirement strategies must
account for a decrease in the purchasing
power of the dollar over time.