Are You Capable of Financing Your Retirement?

It has been observed that retirees just require around 70 percent of the income from their pre-retirement days in order to maintain the same lifestyle. The fact that they do not have to incur daily expenditures like commuting or spending on work clothes reduces their expenditure significantly.

However, it does not mean that retirees do no incur any cost at all, as other costs pertaining to utility bills, travelling and vacations, money spend on recreational activities and of course, healthcare drastically soars up. In some cases, people might be faced with the need for much more money than what they required back in their working days.

Unfortunately, one ends up getting only a fraction of their income through the traditional pension plans and Social Security stands incapable of filling up the gap between monetary requirements and the pension money. Keeping the current retirement plan scenario in mind, it is difficult to be certain of the amount of money a person is likely to receive at the age of 65, if they were to start planning for retirement today.

The uncertainty arises because Social Security benefits might get revised andthe pension plan equations can be changed by the employers at any time. However, they cannot do so retroactively, hence you can be assured because the retirement amount that you have already been qualified for will belong to you. Further, Congress can at any time reform the laws that govern retirement savings plans and which will have a profound influence on your retirement savings a couple of years hence.

In addition, keeping the recent economic dip in mind, it has been proven that in the short term, the stocks can be thoroughly erratic even if they are among the top most consistent and dependable performers in the long run. This is why people should be weary of their stock holdings and the importance of stocks in the retirement portfolio should be established only after considering every possibility of a steep downturn.

If you want to secure your retirement finances make sure that you spread it over a larger framework and make contributions to a number of plans instead of just investing in one possible and potential avenue. If you have the options of 403(b), 401(k), or 457 programs available, then try to put as much money as you can afford, into these programs.

When you invest in these retirement schemes, your employers too would put in a percentage of the money, hence adding to your retirement savings. However, if your work place does not offer any of the retirement plans, consider contributing to an IRA. Another plus is that the contributions that you put in these plans are all tax-deferred, so it is not just you or your employer who’s helping you to save for your retirement but also Uncle Sam.

To keep yourself insured against modified retirement plans that can be mandated by law; you should have your own set of taxable savings well-planned in advance. The ideal way would be to invest in stocks, mutual funds, or bonds, which can garner returns higher than the one provided by bank accounts.