Securing a Stable Future: The 5-Step Retirement Plan

If you’re like many Americans, you are probably more than just a little concerned about your retirement savings, especially in light of the beating the economy took a few years ago. That breath-catching drop in the stock market that happened in August, as well as the downgrade in America’s credit, was enough of a double-whammy to send anyone reeling.

It might be easy to get discouraged but don’t. Current indicators show that 401(k) and IRA balances are already back on track. It’s also comforting to know that Americans are resilient and resourceful, expressing a willingness to work harder and longer in their efforts to catch up. This will help prepare for retirement, from having a steady income to enjoying Independent Senior Living. What makes the difference is a reliable plan, which is what follows.

Do a Reality Check
When most people consider retirement, the first question that usually pops into their heads is, “Will I have enough money to retire?” Unfortunately, many people, even those with retirement plans, have never taken the time to estimate how much they will need in retirement. Further, without a goal, or at least an estimate, there’s nothing to shoot for.

This is an easy situation to remedy. Just figure out a target number and determine whether you are saving enough to reach it. If you need help, there are numerous calculators available online to help. Here’s a good one: Kiplinger.com/links/retirementcalculator.

Play Catch-Up
If you are basing your ability to play catch-up on your retirement plans based on the stock market’s volatility over the past few years, you probably think that you are in a lot of trouble. Fortunately, this is not the case.

This is since returns are based less on stock market performance than on contribution rates. Returns are important, of course, but in the long run, their impact is less significant than contributions.

Try to aim for at least 15 percent of your total gross earnings going to your retirement savings. This includes your employer’s contribution. The goal should be to replace at least half of your current income, when adjusted for inflation, considering that your retirement will probably last another 30 years.

Work Longer
More people in the workplace today are working longer than ever before. In fact, Americans aged 55 and older who are still working are at an all-time high. Why do they do it? Because they need the money. Many work to supplement their Social Security incomes.
Understandably, working longer isn’t an option for many people. Many have stopped working earlier than they had planned due to circumstances beyond their control. For these folks, starting their own business is a frequent alternative.

Create a Retirement Income
The greatest challenge many people face when confronting retirement is determining how to allocate funds that they have spent their lives accumulating into a monthly income they can’t outlive. The Government Accountability Office recently recommended that those without traditional pensions opt to purchase an income annuity as a method of creating an income that stands a better chance of outliving them.

Put Off Social Security
One of the most important questions that many Americans have about retirement is when to start Social Security. Many start their claims early, which foregoes about 25 percent of inflation-adjusted benefits. This is a mistake, especially for married couples, since choosing the right time to claim benefits for each spouse can increase their retirement income by $100,000 or more.

It doesn’t take a financial wizard to understand the implications of all these factors. And when taken as a whole, these steps will provide a more secure retirement in the long run.

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