Ready for Retirement?

Not ready for retirement yet? You see your net worth decreasing? You are not alone. In fact, retirement may be a dirty word in your household as you wonder how long you are going to have to keep working.

In a new survey released by TD Ameritrade Holding Corporation, one out of every two Americans surveyed were not looking forward to retirement. The Federal Reserve Board’s Survey of Consumer Finances reported Monday that the average American family saw their net worth decrease 39% from 2007-2010. Other statistics show that 69% of the respondents have no specific savings goal. Those that did respond had an average retirement savings goal of $750,000. Only 54% were confident that they would reach their retirement savings goal. What is one to do?

Hopefully, the housing and stock market will bounce back and increase net worth, but that can’t be counted on. One way to increase your net worth so to prepare for retirement is to maximize your 401k plan at work. Make sure you are depositing enough to take advantage of any offered employer match. Try to save at least 10% of your income for retirement in a 401k or an IRA. Take advantage of a Roth IRA and Roth 401k if you think taxes will increase. The Roth allows you to save for retirement on after-tax dollars, but the growth and withdrawals will not be taxed.

Start saving for retirement early in your life. The best time to plant an oak tree was 20 years ago. The next best time to plan an oak tree is today. The same is true with retirement savings. Compounding can make a world of difference in your retirement. If a 16-year-old contributes to a Roth IRA on an annual bases until age 66, he or she would have more than twice the money saved than if waited until age 26 to begin savings. Making annual contributions of $2000 with an 8% return over 50 years would grow to $1,147,540, while the same contributions over 40 years would only grow to $518,113. The extra $20,000 invested in the first 10 years grows to an additional $629,428.

Not ready for retirement yet? You see your net worth decreasing? You are not alone.  In fact, retirement may be a dirty word in your household as you wonder how long you are going to have to keep working.

In a new survey released by TD Ameritrade Holding Corporation, one out of every two Americans surveyed were not looking forward to retirement. The Federal Reserve Board’s Survey of Consumer Finances reported Monday that the average American family saw their net worth decrease 39% from 2007-2010.  Other statistics show that 69% of the respondents have no specific savings goal. Those that did respond had an average retirement savings goal of $750,000. Only 54% were confident that they would reach their retirement savings goal.  What is one to do?

Hopefully, the housing and stock market will bounce back and increase net worth, but that can’t be counted on.  One way to increase your net worth so to prepare for retirement is to maximize your 401k plan at work.  Make sure you are depositing enough to take advantage of any offered employer match. Try to save at least 10% of your income for retirement in a 401k or an IRA.  Take advantage of a Roth IRA and Roth 401k if you think taxes will increase.  The Roth allows you to save for retirement on after-tax dollars, but the growth and withdrawals will not be taxed.

Start saving for retirement early in your life.  The best time to plant an oak tree was 20 years ago.  The next best time to plan an oak tree is today.  The same is true with retirement savings.  Compounding can make a world of difference in your retirement.  If a 16-year-old contributes to a Roth IRA on an annual bases until age 66, he or she would have more than twice the money saved than if waited until age 26 to begin savings. Making annual contributions of $2000 with an 8% return over 50 years would grow to $1,147,540, while the same contributions over 40 years would only grow to $518,113.  The extra $20,000 invested in the first 10 years grows to an additional $629,428.

Increasing your net worth and being prepared for retirement takes discipline and sacrifice.  Having the long-term vision of the future growth and your financial well-being helps to ease the pain of the sacrifice and can help increase your strength to save.

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