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TOP 10 WAYS TO PREPARE FOR RETIREMENT
1. Know your retirement needs.
Retirement is expensive. Experts estimate
that you'll need about 70% of your pre-retirement income-lower earners,
90% or more - to maintain your standard of living when you stop working.
Understand your financial future.
2. Find out about your Social Security
benefits.
Social Security pays the average retiree
about 40% of pre-retirement earnings. Call the Social Security
Administration at 1-800-772-1213 for a free Personal Earnings and
Benefit Estimate Statement (PEBES).
3. Learn about your employer's pension
or profit sharing plan.
If your employer offers a plan, check to
see what your benefit is worth. Most employers will provide an
individual benefit statement if you request one. Before you change jobs,
find out what will happen to your pension. Learn what benefits you may
have from previous employment. Find out if you will be entitled to
benefits from your spouse's plan. For a free booklet on private
pensions, call the U.S. Department of Labor at (202) 219-8776.
4. Contribute to a tax-sheltered
savings plan.
If your employer offers a tax sheltered
savings plan, such as a 401(k), sign up and contribute all you can. Your
taxes will be lower, your company may kick in more, and automatic
deductions make it easy. Over time, deferral of taxes and compounding of
interest make a big difference in the amount of money you will
accumulate.
5. Ask your employer to start a plan.
If your employer doesn't offer a
retirement plan, suggest that it start one. Simplified plans can be set
up by certain employers. For information on simplified employee
pensions, order Internal Revenue Service Publication 590 by calling
1-800-829-3676.
6. Put money into a Individual
Retirement Account.
You can put $3,000 a year into an
Individual Retirement Account (IRA) and delay paying taxes on investment
earnings until retirement age. If you don't have a retirement plan (or
are in a plan and earn less than a certain amount), you can also take a
tax deduction for your IRA contributions. IRS Publication 590 contains
information about IRAs.
IT'S NEVER TOO LATE TO START
Start young. A look at the performance of
$2,000 retirement plan investments over time at 4% shows the value of
starting early.
AGE----------------1995 Dollars grow to
30---------------------------$2,000
40--------------------------$24,012
50--------------------------$59,556
60-------------------------$112,170
7. Don't touch your savings.
Don't dip into your retirement savings.
You'll lose principal and interest, and you may lose tax benefits. If
you change jobs, roll over your savings directly into an
IRA or your new
employer's retirement plan.
8. Start now, set goals, and stick to
them.
Start early. The sooner you start saving,
the more time your money has to grow. Put time on your side. Make
retirement saving a high priority. Devise a plan, stick to it, and set
goals for yourself. Remember, it's never too late to start. Start saving
now, whatever your age.
9. Consider basic investment
principles.
How you save can be as important as how
much you save. Inflation and the type of investments you make play
important roles in how much you'll have saved at retirement. Know how
your pension or savings plan is invested. Financial security and
knowledge go hand in hand.
10. Ask questions.
These tips should point you in the right
direction, but you'll need more information. Talk to your employer, your
bank, your union, or a financial advisor. Ask questions and make sure
the answers make sense to you. Get practical advice and act now.
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