Your Financial Savings Plan Made Simple
The greatest ally for workers saving toward retirement is time. The more time you have before you retire, the more time your investments have to grow. Getting a late start does not mean that you can not meet your retirement goals. You are not alone, according to a Federal Reserve data-based economic analysis commissioned by the Consumer Federation of American (CFA) and Direct Advice, more than half of American households (56 percent) are behind where they should be in saving for a comfortable retirement. This article will help you to plan your savings to meet your dreams of a comfortable retirement.
Every penny you save and invest helps to ensure your secure retirement. Sources of retirement income include: Social Security, pension, Individual Retirement Accounts (IRAs) and workplace savings accounts (401(k)s, 403(b)s, and 457 plans and SIMPLE IRAs.) Most financial planners suggest that retirees will need at least 75 percent of their pre-retirement pay, to ensure a comfortable retirement.
Many Americans mistakenly believe that Social Security will account for the majority of their retirement income. But, from the U.S. Government's own Social Security web site. "Under current law, if you have average earnings, your Social Security retirement benefits will replace only about 40 percent, so you'll need to supplement your benefits with a pension, savings or investments." This assumes, of course, that Social Security is secure and will be around throughout your entire retirement. Pensions are scarce, and if you are one of the lucky ones to have a pension, these are becoming less secure.
Thus, in order to have your dreams of a comfortable retirement come true, you must also invest. Workplace savings accounts and Individual Retirement Accounts are the means to bolster any retirement shortfall your plan may have. A special provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 allows investors age 50 and over to make "catch-up" contributions to workplace savings accounts, including 401(k)s, 403(b)s, and 457 plans and SIMPLE IRAs, if allowed by your employer. The tables below shows the current "catch-up" contribution limits imposed by the IRS.
Whether you are three months, three years, or 30 years away from retirement, it is never too early, or late, to start planning. By starting to save now, you can make a big difference in how comfortable your retirement will be. You have worked hard for what you have; you deserve to make your dreams of a comfortable retirement a reality.
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