Your plans for your retirement should be designed and implemented as soon as you start working. This may seem like a daunting task, but it can be easily managed with the help of an experienced retirement planning professional. Many employers provide financial advisors as part of the benefits available to employees, and many of these financial advisors are qualified to help employees with their retirement planning needs. If you have access to such benefits, it may make good financial sense to take advantage of them, as hiring your own financial advisor may cost you. If your employer does not provide such services, you may need to hire your own financial advisor, unless you are knowledgeable enough to make suitable decisions about your retirement planning.

Starting Later Makes it Harder
Ideally your financial advisor will perform a retirement assessment, which takes many factors into consideration, including your income, expenses and your desired retirement lifestyle. Based on your retirement assessment, your financial advisor will help you to determine if your goals and objectives are attainable; make recommendations for any changes that need to be made and determine how much you need to add to your retirement nest egg each pay period. The amounts that you will need to add each period will depend on how soon you start saving.

Example:

  • Assume that you met with a retirement planning counselor, and she created a retirement profile which shows that you will need $1 million for your retirement.
  • Assume too that that you are 25 years old, you plan to retire at age 65 and your retirement analysis assumed an average rate of return on investments of 4%. (Note: reasonable rates of return depend on factors which include the amounts you have saved, the market performance of the assets in which you invest your savings, and for cash and cash equivalents, the rates offered by financial institutions. Your financial advisor will help you to determine what is reasonable.)
  • In order to reach that goal, you will need to save $859 per month.
  • If you start 10-years from now, you will need to save about $1,455 per month.
The longer you wait to start, the larger the amount you will need to save each month, which could make it harder for your to save the required amount, and necessitate postponing your plans for retirement.


Next: Retirement Planning For 20-Somethings: Goal Setting »



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