Retirement Planning |
Life Stage: Retirement Planning
- By Design or Default, You Have a Retirement Plan
- How Much Will You Need to Save?
- Start Saving Early to Maximize Interest Growth
- Retirement Planning Q&A
- Set Clear Goals
By Design or Default, You Have a Retirement Plan
Today, people are generally retiring earlier and living longer. You could spend a quarter of your life or more in retirement. And during that time, the cost of living will most likely continue to rise. If you want to enjoy a comfortable retirement, it pays to start saving now.
How Much Will You Need to Save?
Knowing how much you'll need during retirement can help you decide how much to save. Many experts estimate that you'll initially need about 80% of your current income to maintain your standard of living when you retire. But with prices likely to continue rising, in 25 years, it could take more than twice your current annual income to maintain your standard of living. Fortunately, planning ahead can help you meet the challenge.
AXA Advisors can assist you in charting a course toward financial independence and long-term security. Your AXA Advisors financial professional can help you assess your long-term savings and investment needs in light of your retirement goals and current financial situation. Once you've determined your needs, they can work with you in building a strategy to reach your retirement objectives.
One way to begin the planning process, and experience the AXA Advisors approach to retirement planning, would be to work with our FutureBuildersSM coaching calculator. By answering a few simple questions, we'll be able to give you some instant feedback and food for thought that relate to your specific situation. In the meantime, you might want to consider these important issues:
- Although most people in their 40s and 50s look forward to a happy and healthy retirement, chances are they must meet some major financial obligations first.
- What with a mortgage, child-rearing and college tuition, keeping an eye on the future is challenging, no doubt about it. Yet the planning done in these middle years is crucial to a successful retirement.
- And considering that retirement will probably come sooner, and last longer, than it did for people a generation ago, a much larger nest egg will probably be required.
Whether retirement is distant on your horizon or just around the corner, it's never too early, or too late, to start planning for it. Early is always better, of course. But even a late start is better than none — especially when you consider what's at stake.
Start Saving Early to Maximize Interest Growth
To illustrate, Beth makes $30,000 and starts saving when she's 21. She sets aside $3,000 each year for 15 years. Then she stops making contributions, but lets her money accumulate in the plan until she retires at age 65.
Bob is the same age as Beth and receives the same salary, but waits until he's 36 to join the plan. He puts $3,000 in every year for 29 years until he retires at age 65.
While Bob contributes twice as much as Beth, his account never catches up to hers. If they both earn a steady investment return of 8%*, Beth retires with $885,241 — more than twice as much as Bob, who retires with $367,038. The effect of compounding on investment earnings can be powerful, so it pays to start early.
The sooner you start saving for retirement, the more you'll set aside — and the longer your money will be able to accumulate. Of course, regardless of your age, it's never too late to start.
*This example assumes a hypothetical 8% annual rate of return, that no money is withdrawn, and is not intended to reflect the performance of any particular investment. It does not take into account taxes or commissions.
Retirement Planning Q&A
To begin analyzing prospective retirement investment options, there are a number of questions you can ask yourself about your current objectives to determine which investment products are best suited to helping you reach your goals:
How do you want to spend your retirement?
There may be a profound difference in the income required for a quiet, simple retirement versus an active one where you travel frequently, continue to acquire assets, etc.
How much monthly income is necessary to live as you envision?
The more specifically you quantify your income objectives, the more effectively you'll be able to develop a program to accomplish them. Many financial professionals recommend you create a monthly income and expense budget now to get a handle on how much you'll need to live your desired retirement lifestyle.
Do you want to receive income immediately, or do you want your savings to potentially grow, until you need it in the future?
Are you willing to tolerate fluctuations in the value of your assets?
If so, you might want to consider "variable" annuities.
Are you concerned about outliving your income?
Do you need to ensure that your spouse or other dependents will have an income when you pass away?
Does your employer offer a retirement plan?
Company retirement plans are often subsidized, which means the employer may contribute to your retirement funds, potentially enhancing the ultimate bottom-line payout. You should take advantage of such plans to the fullest possible extent.
How much will you receive from Social Security?
You can request and receive a copy of "Your Personal Earnings and Benefit Estimate Statement" using Social Security Administration form SSA 7004. The form is at local Social Security offices and from Social Security's Internet Web site, www.SSA.gov. An estimate will be provided by the United States Social Security Administration, which is solely responsible for the accuracy and timeliness of information on its Web site.
Set Clear Goals
An AXA Advisors financial professional can help you set clear goals and assist in creating strategies aimed at preparing you for financial independence in retirement. Social Security, your company retirement plan, your personal savings, prospective annuity investments, and other investments should be planned in such a way that they will all work together to help you achieve the lifestyle you're after.
Remember, by design or default, you do have a retirement plan. Make your plan the smart choice.
