RETIREMENT

Planning For Your Retirement

Saving for retirement is your responsibility, guiding you on how to invest those savings is ours. No matter what stage of life you are in, some professional guidance may help. We provide insight, tools, reports, and information that help keep you on track to meet whatever your goal might be.

When working on a retirement plan you need to ask yourself questions and prepare yourself properly in order to get the best results. Anyone can retire, but those who plan right, retire well.

  • How do you plan to spend your retirement?
  • How long will you spend in retirement?
  • How much is enough?
  • When do you start?
  • How do you start saving?How can you get caught up?
  • How do you change your investments as you age?
  • What about inflation?
  • What retirement savings options do you have? And what are the differences?

People are living longer

A typical life in this country was once described as “40 and 40,” meaning forty-hour work weeks for forty years, a few years of retirement and then end-of-story. Well, the story has changed considerably. You already know that the forty-hour work week is pretty much a thing of the past, the forty-year career is fading fast and the time left to spend in what should be retirement is increasing dramatically. The odds that you will live beyond age 70 are pretty good. For instance, if you are currently 50 years of age, you can reasonably expect to live, on average, to age 80.6 years. See the chart below for other age groups and differences between men and women. So you can figure on spending anywhere from 20 to 30 years in retirement. While this is good news, you now may need additional savings to provide for you and your family for much longer than you may have initially planned.

Harnessing your resources

If your current financial situation is typical of that of most people, your retirement income may come from many sources. While Social Security has provided some retirement income for millions of Americans, the future of the program can best be described as murky. So, it may be important to place stronger reliance for financing your future retirement on the resources you can control today, such as your savings and investments.

Can you secure a standard of living?

For many people, Social Security benefits generally will not provide enough money to maintain their current standards of living. Even if you receive your full Social Security benefits, you may well need additional income during retirement to maintain something close to your current standard of living.

AVERAGE 2009 MONTHLY SOCIAL SECURITY BENEFIT

  • Retired workers   $1,161 
  • Disabled workers   $1,062 
  • Widows and widowers   $1,121

Source: U.S. Social Security Administration, 2009

Some taxing thoughts about Social Security

When people view their annual statements from the Social Security Administration, they see a set monthly amount, such as the ones in the previous chart, and they may think instinctively that it’s tax-free income. Well, that depends, since at least some of the benefits may prove to be taxable. If your income — plus half your Social Security benefits — exceeds $32,000 for a married couple filing jointly, or $25,000 for a single person, then a full 50% of your benefit amount will be taxable under current law. If your income plus half your Social Security benefits exceeds $44,000 for a married couple or $34,000 for a single person, then 85% of your benefits will be considered taxable income. The point to remember is that federal income taxes could have the effect of reducing your Social Security benefits, leaving you with less money than what you may have been counting on in retirement.

Don’t Wait to start saving for retirement

Making no decision is, in fact, a decision

If you are putting off saving until tomorrow, you may have to do the same with your retirement. Procrastination may work temporarily in some areas of life but it has never paid off when planning for retirement. Here’s an example of how serious the cost of procrastination can be when it comes to saving for retirement:

Assuming a rate of return of 8% on your account, to accumulate $500,000 by age 65, you would need to save the following amounts each month:

If you start saving at:

Age

25

35

45

55

Amount

$142/month

$333/month

$848/month

$2,714/month

The 8% return is for illustrative purposes only and is not an indication of performance by any product. Your actual return will vary depending on investment performance.

Inflation

Inflation can silently eat away your nest egg. Inflation can quietly reduce the purchasing power of your dollar. The net result after inflation and taxes is that your “real return,” or how much you’ve actually gained after factoring in the impact of taxes and inflation, can be significantly less than your stated average annual return. And, unfortunately, the “safest” investments for income can be most susceptible to the risks of taxes and inflation.

Thoughtful investing - now there’s a good idea

A law of averages that holds true for investing

Dollar cost averaging is an investment strategy that helps to take the guesswork out of when to invest. It’s based on the proven investment philosophy of buying more of an investment when prices are low and less of the investment when the prices are high.

Dollar cost averaging does not treat the timing, the amount or the cost of an investment as strategic variables. It simply involves spending the same amount of money on an investment at equal times, e.g., $100 a month, every month, for an extended period of time. The investments are made continually no matter what the investment’s price might be at any one time.

Dollar cost averaging does not assure a profit and does not protect against loss in declining markets. Because of fluctuating prices, investors should consider their ability to continue purchases throughout periods of both high and low prices.

Informed decisions are good decisions

Time to do the numbers

As with so many people, you are probably bombarded with more information in a day than you can ever use. When it comes to your retirement, you need to access appropriate information to make decisions about the type of lifestyle to which you will want to retire. A worksheet follows that will provide you with the means of accessing that information. It will be an objective and straightforward listing of facts and figures that you provide yourself. You can then take these facts and figures into account as you make a decision about what to do to finance your retirement. Whatever you decide, it will be a decision formed by your own information, knowledge and goals. If, after using the worksheet you can see that something more needs to be done to meet your retirement goals, your Woodbury Financial Services representative is there to help you determine what that something more can be.

Financial Planning Questionnaire