When you seriously start thinking about retirement, the first thing that comes to mind is where will you find the money to live and pay for the basic expenses like food, gas, rent, bills and medical needs. Currently you pay for all these items with your salary, but what happens when the salary ends?
Given that people are living longer because of better health care and life style decisions, retirement funds have to last for up to 30 years or more. Will they last that long?
The majority of people rely on three sources of income when they retire. These are (1) Social Security, (2) retirement benefits from work, and (3) personal savings. Unfortunately these sources may not add up to 30 or more years of enjoyable living without financial worries.
Many people rely too much on government benefits to retire on rather than taking matters into their own hands. It is impossible to predict what will happen to the Social Security system in the future so it should not be relied as your sole income source. At best, Social Security barely covers life’s necessities let alone all those things you’ve dreamed of doing during retirement.
When you retire you will of course save some money by not having the same job related expenses. You will save on work clothes, transportation and parking costs, and even professional reading and continuing education. You won’t be chipping on gifts, coffee, or office treats. You will probably save on entertainment expenses too.
Otherwise you should not have to lower your standard of living significantly when you retire. Your income is likely to be lower, but so will many of your expenses. But you will need to try to stretch your assets and savings to last up to 40 years or even more if you are lucky enough to live to 100. By monitoring your finances starting from today, and thinking of new ways to raise money for retirement, you can put yourself into a better position to retire when the time comes.
Investing early and often is the best way to secure a comfortable retirement. Investing means that your money works faster to grow and does not erode with inflation. Investing can also bring you life long income far greater than provided by social security or personal savings. There are many ways to invest for retirement including:
- Stocks and mutual funds
- Bonds both treasury and municipal
- Property including rental
- IRAs and other tax advantaged accounts for long term savings
- Money market accounts and savings for short term savings
Your 401k retirement plan is another excellent way to build money for retirement. A 401k also means your taxable income is reduced, resulting in less tax payable each year.
There can be tax benefits in relation to investments as well, which is another reason why they are a wise place to put your money. Investing just 10% of your income from a young age can set you up for life once you hit retirement. However, it is never too late to invest so even if you are in your 40s, 50s or 60s now, you still have time to start investing.
