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E-Newsletters: Estate and Retirement Planning News
Help is available in planning for retirement spending Interest Rates for Life Insurance/Annuities Understanding Life Insurance Related Links Other E-Newsletters E-Newsletter Subscription Help is available in planning for retirement spending Retirement for today’s workers will be a much different experience than it was for recent generations. The good news is that people are living longer. Life expectancies have increased dramatically during the past century. According to the National Center for Health Statistics, an individual born in 1900 could expect to live to age 47, while one born in 1950 could expect to live to age 68. Furthermore, an individual born from 1950 to the present in his or her mid-50s and nearing retirement age can expect to live almost 14 years past age 65, once that age has been attained. The not-so-good news is that individuals are becoming increasingly responsible for financing the cost of retirement. Many people in previous generations retired after a long career with one employer, and exited the work force with the security of a guaranteed income for life, courtesy of an employer-sponsored defined benefit plan. Social Security benefits added another layer of income, and some retirees also enjoyed company-paid retiree health benefits. Today’s workers (tomorrow’s retirees) are more likely to have careers that span many employers. Thus, even if covered under a traditional pension plan, they will not have built up as big of a benefit as individuals with one employer careers. However, most workers are no longer covered by a traditional pension plan; they are more likely to be covered under a defined contribution plan, such as a profit-sharing plan or 401(k) plan. These plans typically rely heavily on employee contributions in order to build up a sizable account balance. Factor in concerns about the future of Social Security and Medicare, and it’s evident that workers today must do a lot more to prepare financially for retirement. But even if you’re convinced of this fact, just getting started can be overwhelming. How much money will I need to retire? How much do I need to save every month? Where can I find room in my current budget for retirement savings? An old time management slogan advises, “When eating a large elephant, take one bite at a time.” The same applies to retirement planning, and in this case the first bite should be to estimate the size of retirement nest egg you will need. Most experts in the financial planning field give this rule of thumb: You will need 60%-80% of your pre-retirement salary (adjusted for inflation) in order to maintain your lifestyle during retirement. A periodically conducted analysis by Georgia State University’s Department of Risk Management and Insurance puts this percentage in the 75%-85% range. A careful assessment of your existing retirement savings, expected benefits, and plans for postretirement lifestyle will help you come up with a reasonable estimate. The emphasis is on the word “estimate.” Planning for any future event comes with its share of uncertainties. Planning for retirement is no different, and perhaps even more tentative. However, the inability to come up with a dollar amount that is carved in stone shouldn’t prevent you from taking this important first step in retirement planning. Help is available to get you started. The Web site of the American Savings Education Council (www.asec.org) contains a worksheet called the “Ballpark Estimate,” designed to give a basic idea of the savings one will need in retirement. In six steps, the Ballpark Estimate computes a figure that approximates the amount you will need to save annually in order to fund a comfortable retirement. To keep things simple, it estimates your Social Security benefits and rate of return on investments. You need to fill in the amount you expect to receive from a traditional employer pension, and the amount of any current savings. The ASEC Web site also contains about 100 other calculators on a wide variety of financial planning issues, including a more in-depth “Am I Saving Enough?” retirement planner, and several on budgeting issues. If you are currently a participant in a 401(k) plan or have other investments, the financial firms that administer and/or manage these funds might offer online retirement planning tools. For people seeking more detailed and personalized assistance, a call to one of our Farm Bureau Insurance agents or Advanced Planning Specialists is a good place to start. Don’t be daunted by the uncertainties of the future or fears that you’ve waited too long to begin to save. Take that first bite, and savor the fact that you’re beginning to take your financial future in hand Related Links: Life Insurance and Annuities including...
The product information included in the Farm Bureau Insurance of Michigan web site is intended for Michigan residents only, and is neither an offer to sell nor an invitation to purchase any insurance product. |
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