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Lifetime Retirement Planning
By Daphne | April 17, 2008
Generally, the rule for saving for retirement was to set aside 10 percent of your current salary. Then if you saved diligently for 30 or 40 years you would have enough to live on for the rest of your life.
The Financial Planning Association suggests that people in their 30s and 40s “invest a minimum of 10 percent of your salary toward retirement.” This way compounding interest is still on your side. Also, as you move closer to retirement the recommendation doubles.
How does this play out for people who have started saving late? If you started saving late but are earning more now then you still may be able to catch up. You may need as much as 85% of your current take home pay to live during retirement.
This sounds great but when people were planning for retirement before the era of designer mortgages many people owned their homes before they retired. Of course they were not able to receive a tax break for the interest paid to their mortgage companies, but they did reap the benefits of lower taxes because they were beyond a certain age and no mortgage to pay. Now many people who are reaching retirement age still have a mortgage to pay and little saved.
Another aspect of planning for retirement is that people are living longer and costs are constantly rising. You do not want to outlive your money. For many, retirement planning is a goal in itself and the planning and preparation stop once retirement age is reached. How much will you have to spend? When will you be able to use some of the money you have? Will you have to cut down on expenses in order to live?
Starting early is imperative, but if you haven’t started early it’s better to have some than nothing at all. If you choose to work into your seventies that’s one thing. If you have to work that’s another.
The FPS site features articles to direct people who are not so sure that they are moving in the right direction for their future. If you have a question, you can even receive a general answer from a financial planner. [This does not mean that you are contracting a financial planner to invest any money for you, but if you have a serious question about which direction you should move your investments into or questions about general risk tolerance you may submit a question.]
Topics: April 2008 |