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Retirement: Plan early and save consistently

By Michael Fertig 3 min read
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Michael Fertig

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Most people often spend more time planning their next vacation or car purchase than planning for their retirement and future. That is a big mistake. At Fragasso Financial Advisors, we regularly counsel people to make the time to plan for their future financial security. Failing to plan sufficiently for a time in your life that could last 20 or 30 years, during which you’ll have to rely largely on the assets you’ve accumulated, could be the biggest and most costly (pun intended) mistake you’ll ever make.

Sitting down and planning out your retirement years can feel like a daunting task, but it’s also essential. If you are going to put in the time and effort to plan, it makes sense to do it the right way. There are many important issues that you should consider when you begin this planning session, including:

• How much will you need to live comfortably in retirement?

• When should you begin taking Social Security?

• When and how should you draw funds from your IRA account?

• How will you protect your assets from a potential long-term care stay?

• What type of professional help will you need to properly manage your money?

One very important step that many people miss in the planning stage is determining how much money they’ll need to save now in order to reach their goals in retirement. According to a 2012 Retirement Confidence Survey conducted by the Employee Benefit Research Institute (EBRI), only 42 percent of Americans have calculated how much money they’ll need in retirement. That means that well over half of us haven’t taken this very important first step, or we’ve simply left it up to guess work. Unfortunately, this typically results in people running out of money in their 70s or 80s and having to make major changes to their standard of living.

The best financial advice anyone will ever give you is this: start saving as early as possible and save consistently. You’ll be better prepared the earlier you start saving for retirement. Consider the following chart that illustrates the monthly rate that you would need to save at the age of 20 vs. 50 to arrive at $1 million before retirement.

The lesson that we can learn from this illustration is simple: The earlier in life you begin saving, the better off you’ll be when you enter the final phase in your life. And with longer life expectancies, medical advances, and the constant pressure of inflation and cost of living increases, the better prepared you will need to be for the last 20-30 years of your retirement.

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