NC Retirement Planning Information

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NC Retirement Planning Information

Having a retirement savings plan means you have a step-by-step roadmap to guide you through the different stages of your life, focused on the goal of being able to live comfortably once you stop working. Everyone's plan will be different, but a good starting point is to calculate how much you need to save each month to retire and bring in about 70% of your pre-retirement income.

The Cost of Waiting

If you start saving for your retirement at age 25, putting away just $50 a month into an account with an 8% annual rate of return, you will have $162,169 in that account when you are 65. If you wait one year to start saving, your account balance will be reduced by $12,592. That's a significant amount of money due to annual compounding.

The closer you wait until retirement to start saving, even doubling the amount you put in each month, the tougher it will be. If you start at age 45, putting away $100 a month, you will only have $57,294 in the account at age 65.That is $104,875 less than starting at age 25. The bottom line is, the earlier you start saving, the better, no matter how small the amount.

Regardless of your age, it is never too late to start planning for your retirement. Having some money to retire on is better than having nothing at all!

Don't wait another day, week or year! Start right now, because the sooner you start putting money away, the more time your money has to grow.

Once you've made the commitment to start planning for your retirement, these are the first three steps you should take to start the process:

* Check with your Human Resources Director to find out what type of retirement plan(s) your employer offers. If your employer doesn’t offer a retirement plan or if you don’t already have a retirement savings plan, use the resources we have listed here to start working on one right away.
* Certain types of retirement savings vehicles are available to everyone, such as IRAs (Individual Retirement Accounts). There are several types of IRAs to choose from that have various tax benefits. Check into these opportunities to see what best fits your needs. Once you develop a retirement savings plan, make sure you fully understand and are comfortable with the steps in your plan. Pick at least one day a year to revisit your plan and see how your investments are doing.
* However your retirement savings plan is structured, make sure it is well diversified to lower your overall investment risk. This strategy means investing in different asset classes and among the securities of many issuers. *This is the most important step. Don’t put all your eggs in one basket.* DIVERSIFY, DIVERSIFY, DIVERSIFY!

Retirement Security

The types of funds that make up retirement income for most Americans have undergone many changes throughout the years (see illustration of retirement income by source in 1999.) Individuals are increasingly having to rely on personal retirement savings, earnings, and their own contributions to employment-based plans to maintain a reasonable standard of living during retirement. This is one reason it is so imperative to have a retirement savings plan in place.

Personal Savings

The personal savings rate among Americans is at an all-time low (see illustration of the personal savings rate from 1960-2000). For the first time since 1933, that savings rate is almost zero. In 2000, the average American household saved only 1% of its disposable personal income. Nearly two-thirds of American workers have no retirement savings account. In order to be the most prepared for your retirement years, it is critical to begin saving as much as you can, as early as you can.

Retirement Savings Vehicles

There are many types of savings vehicles you can use to put money aside for retirement. One of the most popular is the IRA (Individual Retirement Account). It’s estimated that two-fifths of U.S. households own IRAs (see illustration of ownership of types of IRAs in 2001.) IRA assets are also growing substantially. In 1999, for the first time, assets in IRAs exceeded those in employment-based retirement plans. IRAs provide various types of tax benefits. Check with a financial advisor to see which type of IRA might best fit your needs.