Retirement and College Savings Plans - Savings Goals



People belonging to the largest generation in history, the so-called Baby Boomers, have finally begun to reach 59.5 in 2005. Over the next 18 years, 78 million people will reach this age. Why is turning 59.5 so important if the majority of people don't retire until they are 65 or older? This age marks a life milestone, when individuals may begin to take distributions from several types of retirement accounts without penalty.


One of the primary goals for investors is to save enough money for their retirement years. What if they haven't saved enough by age 62, 63, 64, 65? How do they know whether the amount they have saved will carry them through their so-called golden years, especially if they begin withdrawals at age 59.5?

There are a number of factors for your clients to consider when planning for a worry-free retirement. For instance, a person who retires today at the age of 62 will need to save enough money to pay expenses, support lifestyle expectations and perhaps build an estate to leave behind, for 25 to 30 years! At the same time, a dollar today will be worth about $0.42 when that same 62 year old turns 92. So, not only are people in the U.S. living longer, requiring them to save additional money for those extra years, but they also need to plan ahead for the eroding effect inflation will have on their purchasing power over time.

The government has created a number of retirement plans to help U.S. citizens achieve their retirement goals and to lessen the impact of inflation on their assets. In this section, we explore several tax-deductible and tax-deferred retirement plans and accounts and their role in developing retirement strategies for your future clients.

Paying for college has also become an increasingly worrisome prospect for many families in the U.S. While inflation erodes retirement savings at roughly 2-4% per year, the cost of a four-year undergraduate college program has been rising steadily at a rate of 5-6% or more per year. Congress has also recognized the need for college savings plans that alleviate at least some of the costs associated with college savings while providing methods and incentives to help families save for future higher-education costs. The last portion of this section is devoted to these new college savings plans.

Employer-Sponsored Retirement Plans
Related Articles
  1. Economics

    Explaining Strategic Alliances

    A strategic alliance is a business relationship between two or more entities that share recourses for a common goal.
  2. Investing Basics

    Understanding the Spot Market

    A spot market is a market where a commodity or security is bought or sold and then delivered immediately.
  3. Investing Basics

    What is a Settlement Date?

    A settlement date is the day a security trade must be settled.
  4. Investing Basics

    Explaining Risk-Adjusted Return

    Risk-adjusted return is a measurement of risk for an investment or portfolio.
  5. Taxes

    What IRS Form 8949 Is For

    Selling a painting or that lake property? Disposing of your fossil fuel stocks? You need to know about this IRS form.
  6. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  7. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  8. Economics

    The Problem With Today’s Headline Economic Data

    Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
  9. Forex Education

    China's Devaluation of the Yuan

    Just over one week ago the People’s Bank of China (PBOC) surprised markets with three consecutive devaluations of the yuan, knocking over 3% off its value.
  10. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
RELATED TERMS
  1. Yield To Maturity (YTM)

    The total return anticipated on a bond if the bond is held until ...
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the ...
  3. Interest Coverage Ratio

    A debt ratio and profitability ratio used to determine how easily ...
  4. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  5. Receivables Turnover Ratio

    An accounting measure used to quantify a firm's effectiveness ...
  6. Remittance

    The term most commonly refers to money being sent via mail or ...
RELATED FAQS
  1. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  2. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  3. How are non-qualified variable annuities taxed?

    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  4. Why would someone change their Social Security number?

    In general, the Social Security Administration, or SSA, does not encourage citizens to change their Social Security numbers, ... Read Full Answer >>
  5. Are spousal Social Security benefits retroactive?

    Spousal Social Security benefits are retroactive. These benefits are quite complicated, and anyone in this type of situation ... Read Full Answer >>
  6. Is Argentina a developed country?

    Argentina is not a developed country. It has one of the strongest economies in South America or Central America and ranks ... Read Full Answer >>
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!