Investing for Retirement
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Financial independence during retirement is a goal that many of us desire but rarely plan for adequately. These facts underscore the importance of ongoing retirement planning:
- According to the National Center for Health Statistics, the life expectancy for an American born in 1900 was 47.3 years; an American born in 2000 is expected to live 77 years. Obviously this extra longevity needs to be considered when planning for retirement. 1
- Social Security provides one-third or less of our retirement income. According to the Social Security Administration, the average benefit payable as of January 2004 is $903 per month. 2
- Long-term nursing home care can deplete assets quickly. According to an Aug. 4, 2003 article provided through Business Wire, a year's stay in a nursing home now averages more than $57,000 and can exceed $166,000 annually in some parts of the country.
- A 2003 survey by the Employee Benefit Research Institute showed that 40% of those who are retired did so early — of those half, retired before they planned because of poor health, job situations or disability. 3
- Many companies are changing their pension plans and retiree benefit packages to save money. Although currently low, inflation still plays a crucial role in retirement planning.
We already know that medical science is helping us live longer. Although this is good news, a potentially longer life expectancy means that the financial resources you set aside for retirement will have to stretch over a longer time and any possible episodes of poor health. Increasing costs of goods and services, limited Social Security benefits and a potentially lower income should stimulate an interest in making changes that will benefit you financially in the short or long term. If you think your resources aren't going to meet your needs, it's time to make some changes.
A financial planner can help you estimate what you need to maintain your current lifestyle at retirement. A planner will evaluate any company-sponsored retirement plans, individual retirement accounts, savings accounts as well as other sources of income you may have. Then, working with you, the planner will develop an effective, step-by-step retirement plan strategy, taking advantage of current tax laws and suitable investment vehicles. Creating a strategy will help set the stage for a happy, secure retirement.
There are five important steps to follow when planning and deciding on investments for your retirement:
- Establish your objectives.
- Determine your investment style.
- Evaluate investments.
- Choose an appropriate investment plan.
- Execute and periodically examine the plan.
1Source: National Center for Health Statistics, National Vital Statistics System.
2Source: Social Security Administration, www.socialsecurity.gov.
3Source: 2003 Retirement Confidence Survey, Employee Benefit Research Institute, American Savings Education Council and Mathew Greenwald & Associates.
2Source: Social Security Administration, www.socialsecurity.gov.
3Source: 2003 Retirement Confidence Survey, Employee Benefit Research Institute, American Savings Education Council and Mathew Greenwald & Associates.
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