A recent study released by the Government Accountability Office reported that the average amount that those within 10 years of retirement have in retirement savings is just over $100,000 and those over 65, almost $150,000. This highlights a problem; the former only represents a figure of $310, the latter $650 as a monthly payment, protected against inflation. There is no way that these figures, even supported by Social Security benefits, can provide anything like a comfortable retirement.
These figures are depressing enough. Up to 30% of people over 55 have no retirement savings at all. They will only have Social Security to help them when they retire. Even then the System is under pressure. With people living longer and fewer paying in by the mid-2030s the present level of benefits are unsustainable without the input of significant additional funds. That means taxation and there is not a majority in Congress at present prepared to sanction that. Present estimates suggests benefits would have to fall by around 25% and they are already insufficient to provide that comfortable retirement.
There are several ways to provide for retirement and it is never too early to start to save. One of the best ways is through a 401K in which employers will match individual contributions up to a certain level. Those beginning a 401K in their 20s are probably making their best ever financial decision. There are individual retirement accounts and defined benefit plans. There are various tax benefits to consider when thinking about what to do and professional advice can be invaluable.
More people should look at these things as a matter of urgency because Social Security remains the major income coming into a household in the USA where the occupants have retired.
It is only possible to build up an adequate fund if you start early. If you seek professional advice you are likely to be told that you should aim to have a fund equivalent to eight times your annual salary when you retire. To do that you must start young so that you have twice your annual salary at 40, and four times at 50.
Ordinary people will only be able to build such a fund if they have their finances in good order. That means not carrying debt which incurs a high level of interest. Balances on credit and store cards are typical of this and should be paid off as a matter of urgency; a consolidation personal loan is a good way to do this. If you look online you should be able to find a good installment credit provider that will approve a realistic application if you provide details of your regular income.
There are some other things you can do to create a surplus. They include looking to see whether you are getting competitive utilities, as well as checking on your telephone network and insurance costs. It does not mean great sacrifice, just a little time, to see whether you are spending too much. Of course if you can also make economies you will have a little more to put aside each month.
The whole thing is about discipline. If you have a properly prepared budget and live by it you can build up savings over time; the main thing is to give yourself time. Even if you have a student loan to pay off when you start your first job you should still be able to put something aside. You need to resist temptation of course because suddenly you will have a regular income that will justify a credit card and a line of credit. If you cannot afford something you should think very seriously before you buy it and effectively spread its cost over a number of months before you have paid for it in full. Any existing balance has high interest added each month.
As people get older they deserve a comfortable retirement. If their health begins to fail there is not a great deal they can do other than get some treatment. If their retirement is uncomfortable because of lack of resources that is self-inflicted if during their working lives they could have saved more. Be warned!
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