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Did you know that in the
last 10 years the number of
Americans enrolled in 401K
plans has doubled and their
assets have quadrupled to
almost $2 trillion! Even
so, most Americans are not
saving enough for
retirement.
Most people today find it a
challenge just to pay the
monthly mortgage, car
payment, child care costs,
insurance costs and other
daily living expenses.
Thinking about saving for
retirement is often a
“back-burner” issue. But
with longer life expectancy
and rising inflation costs,
you need to plan for your
retirement years.
The sooner you start saving
for retirement, the more
money you’ll have because of
the compounding of interest
year after year. Consider
this example provided by the
FDIC.
Two people want to have
$1 million in retirement
savings at the age of
60. One starts saving
at age 20, the other at
age 40. Assuming a
five-percent interest
rate that’s compounded
daily, the 20-year-old
needs to set aside $651
a month to reach the
million-dollar goal.
The 40-year-old must do
a lot of catching up by
saving about $2,422 each
month.
With a fluctuating stock
market and the collapse of
major corporations, how do
you protect your retirement
nest egg? First determine:
-
Your objectives after
your retire (lifestyle,
vacations, etc.)
-
Your assets (your
savings, value of your
home, etc.)
-
Your retirement benefits
(pension plans, social
security benefits, etc.)
The Internet is filled with
work sheets to help you
decide how much money you
will need when you retire.
The Federal Reserve Bank of
Dallas has a free
publication to help
consumers with planning
entitled Building Wealth: A
Beginner’s Guide to Securing
Your Financial Future. It
may be ordered from the
website at
www.dallasfed.org/htm/ca/pubs.html.
The best plan of action is
to set aside 10 to 20
percent of your income each
year for retirement. If
your employer has a 401K
plan, this is an easy and
painless way to reduce your
taxable income while saving
for the future. Earnings
can build up quickly and
many employers will match
your 401K contributions as
an added incentive.
If you invest in the stock
market, be sure to diversify
your portfolio with an
assortment of stocks, bonds,
mutual funds and
certificates of deposit.
Learn as much as you can
about investing before
buying and don’t be
discouraged by a down
market. Over the long term,
the stock market has
provided better returns than
virtually any other
investment you could make.
Another part of your
retirement nest egg is your
Social Security benefits.
Every 4-5 years, get a free
copy of your “Earnings and
Benefits Estimate Statement”
from the Social Security
Administration. This report
shows your earnings over the
years and how much you can
expect to receive upon
retirement.
Be sure you know when you
are eligible to begin
withdrawing from your
retirement savings and
collecting social security
benefits. Know how much you
can withdraw and the tax
implications.
Find out if your retirement
deposits are fully insured
by the FDIC. Your community
banker would be happy to
discuss with you available
options to maximize
insurance coverage.
When in doubt, turn to your
local hometown banker or
other trusted financial
specialist and ask them to
help you navigate the road
to successful retirement
planning. It’s never too
late to start planning for
your future.
Provided as a public
service by First Commercial
Bank and the Independent
Bankers Association of Texas
(IBAT).
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