Tuesday, October 26, 2010

Retirement and You

Last week was designated as National Savings Retirement Week to help bring awareness to the need to plan for retirement. Many Americans still do not save enough for retirement and some do understand the importance of saving for retirement.

According to a 2009 EBRI a study of employees: 43% of workers said they have less than $10,000 in savings, while 27% of workers said they had less than $1,000. According to the FDIC: 97% of Americans will be dependent to some degree on family, friends or the government in retirement; a 65 year-old couple retiring today has a 63% chance that one of them will live to 90 years old; a 65 year-old couple retiring today will need approximately $240,000 to cover just medical expenses even with Medicare assistance.

You will need at least 60-70% of your salary during retirement. You should plan to save enough in your retirement account to cover living expenses for at least 20 years. Here is a retirement checklist to use when saving for retirement.

1. Do you have a retirement account?
2. Have you contacted a professional to map out your retirement plan and goals?
3. Do you know your retirement account balance?
4. Do you check your quarterly retirement statement?
5. Is your retirement portfolio diversified?
6. Do you know where you will live, what age you want to retire and the lifestyle you want to live during retirement?
7. Have you determined what costly expenses you will need during retirement (healthcare, prescriptions, etc.)?
8. Have you created an estimated budget for retirement?
9. Will you have enough life, health, disability and long-term care insurance?
10. Do you plan to pay off your mortgage and any other large debts prior to retirement? If not, how do you plan to pay for those expenses?
11. Do you want to be fully retired or work part-time?
12. Will you be eligible for social security when you retire?
13. Is your beneficiary information is up-to-date?

Here are 6 ways to help you prepare for retirement and increase your retirement savings.

a) Don't panic. Don’t make decisions based on emotions or get overwhelmed by the media, fear, anxiety and nervousness of those around you. Stay calm and follow the plan you have setup with your financial planner. Don't torture yourself by checking the stock market everyday or checking your retirement account balance every week or every month.

b) Review. Review your financial goals with your financial planner at least once a year to ensure you are on track to meet your goals. Also, check your statement for any errors and notify your financial planner immediately.

c) Time. Your money cannot grow if you take it out too soon. It takes a minimum of 7 years to see a significant return on your investment so leave your money in your account.

d) Diversify. If you have all of your investment in one area, re-allocate your investments to at least 3 areas to minimize losses.

e)DRIPs. To offset any losses you may have experienced you can purchase a Dividend Reinvestment Plan (DRIP) or use it as an easy way to start investing.

f) Buy now. The motto is "buy low, sell high" is very appropriate during a recession. This is a great time to buy stocks or to invest in a mutual fund. When the market bounces back you will have achieved great gains.

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