Start saving now

Setting goals and sticking to them

Only half of Americans put aside money specifically for retirement, according to the U.S. Department of Labor.

"Retirees spend at relatively high levels, needing between 74 percent and 83 percent of their pre-retirement income to maintain their standard of living in retirement, yet only 56 percent of households are adequately prepared," according to the 2002 National Summit on Retirement Savings Final Report. The report also stated that most households will not be able to make that percentage of their pre-retirement income depending on Social Security benefits alone.

The time to start saving is now. Learn all you can about retirement planning and then act on it. While the success of your retirement plans can't be predicted, it only makes sense that the more you save now, the more likely you are to enjoy the retirement lifestyle you desire.

Even modest contributions today will add up to sizable sums over time. When considering how to approach retirement planning, tells investors to ask three important questions:
  • How much will I have when I retire?
  • What will my retirement income be?
  • Will I have enough to support my chosen lifestyle?
"A comfortable retirement usually requires Social Security, pensions, personal savings and investments," states "Savings Fitness: A Guide to Your Money and Your Financial Future." (PDF) "In short, paying the retirement you truly desire is ultimately your responsibility. You must take charge. You are the architect of your financial future."

The U.S. Department of Labor, in the "Savings Fitness" booklet and the article "Top 10 Ways to Beat the Clock and Prepare for Retirement," recommends taking several steps to prepare for retirement, starting with knowing your needs. Experts suggest you will need 70 percent to 90 percent of your pre-retirement income to maintain your lifestyle in retirement. Think about what you want to do during retirement before you determine this number - if you think you will stay close to home, you may need less. If you plan to travel extensively, you may need more. Also consider how long you will be retired - the average American spends 18 years in retirement - and consider inflation.

Once you've determined what you want to have when you retire, it's time to make a plan for getting there. Research your employer's pension plan or retirement benefits. More than 85 percent of workers at companies with more than 1000 employees are covered by an employer-sponsored retirement program, like 401(k). However, a third of employees that have 401(k) coverage available do not take advantage of it.

If you have a plan available to you and are not participating, you should start now. Putting your money into a 401(k) or 403(b) offers many advantages:
  • Lower taxes.
  • Automatic deductions.
  • Compounding interest over the years.
  • Possibly additional matching money from your company.
Also consider putting money into an Individual Retirement Account (IRA).

You should find out more about your Social Security Benefits. On average, they pay about 40 percent of pre-retirement income. Decide whether or not you want to include that in your plan for retirement. To learn more, contact the Social Security Administration for a printout of your account. You can request this information by calling 800-772-1213 or accessing the SSA web site at

You'll probably need personal savings as well to enjoy retirement. According to, when investing money, there are short-term and long-term choices. Short-term options include checking accounts, savings accounts, money market funds and certificates of deposit. Long-term investments include stocks, bonds and mutual funds. These are good options if you have funds to invest that aren't needed immediately. You can invest them over a long period of time and watch them grow.

You need to stick to your goals. Don't use the money you have set aside for retirement for other things; protect it and the interest it is earning. Consider basic investment principles; diversify and balance your investments to maximize their growth and minimize your risk. Every few years, take stock of where you are and adjust your savings plan accordingly so you can achieve your goal.

Sources: 2002 National Summit on Retirement Savings Final Report;; "Savings Fitness: A Guide to Your Money and Your Financial Future," (PDF) from the U.S. Department of Labor Retirement Savings Education Campaign; "Top 10 Ways to Beat the Clock and Prepare for Retirement," from the U.S. Department of Labor;



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