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This question isn't reserved for those nearing a magic age. In fact, it's best answered the earlier you start considering the prospect of living out your golden years on your own terms.
In a recent poll, Allianz Life Insurance Company asked people aged 44 to 75 which is their greatest of two fears. Depleting their assets was the answer given by 61 percent of the respondents. The other 39 percent were more afraid of dying.
So how much money do you need to retire securely? There is no magic number. And at this particular point in time, there's no formula we can rely on either. The terms seem to be changing as quickly as I can hit the next key in writing this article. Consider yourself pretty lucky if you've already reached this plateau and collecting a company pension you can depend on. The rest of us will never know that security.
GCF Bank has several calculators to help with retirement planning on our website. Find out whether a traditional or Roth IRA is best for you. Learn how long you'll be able to withdraw money from your savings, what rate of return you need to reach a specified level and more. Find them at www.gcfbank.com/calculators.asp.
Long-held general planning guidelines no longer apply. At one time, expecting to spend 70 percent of your current income during retirement was an acceptable formula. But with people living longer and skyrocketing healthcare costs, this figure may no longer be enough.
Another rule that bit the dust was that $1 million in retirement savings would guarantee an available cash flow. Not so. With inflation factored into longer lifespans and medical costs, some advisors suggest saving double this amount. Yes, the same advisors that profit by investing your money. So while this may hold true for some, others will fare quite well with even less than $1 million tucked away.
Even those who thought they were ahead of the game and invested in 401(k)s and IRAs to fund what company pensions once did are shaking their heads. The stock market's recent volatility has sent shock waves through the best laid plans.
There's good news for those whose retirement isn't looming on the horizon. Since the inception of our free-market system, we've seen a series of ups and downs. And the one rule that still applies is this: Whatever goes up must go down, and vice versa. So with time on your side, sit tight. Your portfolio will recover recent losses. You're likely to see a few more of these cycles before you reach the age of 70 when you have to start withdrawing from your retirement account.
For many, the decision to retire is no longer a decision they can control. Job loss can force your hand. With unemployment at record-high levels and financial struggles, companies tend to hire younger, less experienced workers to fill job openings. With them comes a smaller paycheck.
Others are finding it hard to land that part-time job they counted on to supplement their Social Security check. Which just could be in trouble as well. Read on...
The woes of our current Social Security system have been well-documented. When Franklin Delano Roosevelt introduced the Social Security program in 1937, he intended the funds to go into a Trust Fund rather than the general operating fund so the money couldn't be touched by other budget requests.
That didn't last very long. A mere 30 years later, the Johnson Administration dissolved the Trust Fund. Funds were now deposited directly into the general operating budget to be tapped by departments whose needs were more imminent.
And the debate over Social Security's solvency has ensued ever since.
Fast forward to today, and the federal budget deficit has plunged the program's plight right back into the national spotlight. A plan to reduce our country's deficit is expected to be released by the end of this year. One facet being considered is reducing, or even eliminating, future Social Security benefits.
Legislators are split between trying to strengthen or shrink the program. For the past 25 years, Social Security has been taking in more than it has been paying out. The result is a $2.5 trillion reserve fund invested in government bonds.
However, the recession and high unemployment led to less money coming in than anticipated. The system is already drawing on those reserves.
The Congressional Budget Office estimates that the reserve fund and payroll taxes will allow full payment of benefits for another 33 years at their current level. But that's not likely to happen.
There will be future benefit changes. One being discussed would reduce payments for workers who are 55 or younger in 2011, a mere 10 years before the average retirement age. Those born in the '60s may not see their full retirement benefits kick in until age 70 if this suggestion becomes part of approved legislation.
Estimates show that, even if Congress does nothing to increase revenue, the system would still collect enough in payroll taxes to pay 75 percent of promised benefits. That's a gap small enough to overcome.
Earnings about a specified level, currently $106,800, aren't currently subject to FICA tax. That level increases annually based on average wages. Yet if that cap were lifted, payroll tax revenue would increase.
However, this is the same income group being taxed to fund healthcare. They're also the target of tax increases most every time a new need presents itself.
There's also talk of raising the base payroll tax rate. Payroll deductions for FICA taxes withdrawn from worker's earnings cover half of this purpose. The employer pays the other half. This would hurt the self-employed who pay both portions on their own.
This article didn't give specific advice on saving for retirement. It didn't offer firm guidance on guaranteeing your saved funds would last throughout your retirement years. Maybe it raised more questions than it answered.
I hope so. Because when you question, you ultimately find your own answers. You learn what it is that you need to maintain your individual lifestyle.
The majority of Americans expect the U.S. economy to improve over the next six months, according to a survey by the Certified Financial Planner Board of Standards, Inc. Forty-four percent expected improvement compared to the twenty-eight percent thinking the economy will get worse. Fueling this are the generally positive economic indicators.
Unemployment continued to drop, from 9.9 percent in May to 9.5 percent in June even though the workweek dropped. Temporary Census workers were laid off but private hiring continued a slow increase. The increase of 91,000 jobs included private service-providing jobs such professional and business services and leisure/hospitality. The goods-producing and construction sectors lost 8,000 and 22,000 jobs each. Manufacturing has risen three months in a row. Finally, jobless claims show improvement, falling 21,000 in the July 3 week to 454,000 for the lowest level since early May. The four-week average fell 1,250 to 466,000, the best weekly improvement since early May though the level is still slightly higher than a month ago.
Retail sales continue unchanged according to Redbook reports, at a plus 3.1 percent same-store year-on-year pace.
Offsetting these positive indicators is a shrinking of consumer credit, which contracted a sharp $9.1 billion in May with April revised to show an even more severe $14.9 billion contraction. The April revision is very surprising given the initial reading of a $1.0 billion gain!
The stock market has continued to react positively with the sixth day in a row of growth, giving support to the positive expectations of Americans.
The Social Security Administration offers detailed information about your benefits under current law. Find valuable planning tools on their website.
Baby boomers, there is a website just for you. Find great tips targeting your stage in life, including retirement planning.
The realm of George Steinbrenner's influence transcended beyond the NY Yankees, or even Major League Baseball. Read a tribute to the man who changed the face of all competitive sports.
Do you REALLY care who has extra eggs to sell on FarmVille or needs wood on FrontierVille? You can hide those annoying updates without hiding your friends. Run your mouse over the top right corner of the post to display the Hide button. Click it for the option to hide future updates from the application or hide your friend.
Quotable
"Knowlede speaks, but wisdom listens." - Jimi Hendrix
Today in History
1985 - Live Aid rock concert took place in London, Philadelphia, Moscow and Sydney.
Flash Fact
Clocks made before 1660 had only one hand - an hour hand.
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