401ks are a popular tool used for retirement planning. One problem with 401k plans is the investor’s reliance on employer matching for the plan. This may cause an employee to rely too much on the employer and not contribute enough to savings. Most Americans have no idea how much money they should be saving. If you have never used one, a retirement calculator will probably leave your jaw on the floor in amazement. Planning for retirement is a difficult task and cannot be taken lightly.
Even when you use a professional adviser, the financial planning process can be difficult. There are just so many variable to consider: how much your retirement savings earn over the years and into retirement, how much debt you have, if any, at the age you plan to retire, and the quality of your health entering retirement are just a few considerations.
You also need a way to account for fiscal irresponsibility on the part of Government (i.e. inflation) and what that will do to your retirement savings. On the internet there are dozens of retirement calculators available, sponsored by retirement organizations, investment companies and other businesses in the money management business that can help you do this. What most of the calculators will show you, is that for most people, even relying on Social Security, you will need a lot of retirement savings to maintain a near pre - retirement standard of living.
The economy will probably recover, and continue to grow. However with inflation at anywhere between three and five percent, you are going to be gaining and losing value in your investments based on how much your savings is being eroded.
$50 a week used to be a “normal” wage. Even during mid-life that level of income had increased to $200 a week. Now, however, you would not even think of trying to live off of $200 a week, let along $50/week.
Average Americans making $500 to $1,000 per week today will see the same kind of results that their parents and grandparents are seeing now, unfortunately. The retirement calculators are showing that they should have a retirement nest egg of close to a million bucks if they want to retire comfortably for 20-30 years.
One calculator tested online showed that an adult starting with an assets of $100,000 and adding $4,000 year to that nest egg would enter retirement with almost $900,000 but still be bankrupt by 85.
An essential part of managing your existing income is setting aside and investing funds for your retirement. Despite the difficulty of estimating your retirement income and expenditures, there is a wealth of assistance available on the internet to get you started, and professional advisors ready to help when needed.
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