Crunching the Numbers to Get Money For Retirement

Retirement is going to cost you a LOT of money.

Those numbers can be intimidating. Think about it – right now you spend all year working hard to make enough money to live on. When you retire, you want to be able to live to a similar standard to the one that you’re accustomed to, which means that you’ll need to put away twenty to thirty year’s worth of your annual salary, plus inflation. That amounts to hundreds of thousands of dollars in savings to get money for retirement!

It’s a challenge for most of us to imagine having several hundred thousand dollars in the bank just sitting there. So how does the average person ever get to retire when the numbers are like that?

Making the most of your money for retirement

The way that most people get to those numbers so that they can actually retire is through a careful wealth management which usually involves mixing it up and getting their retirement dollars from a variety of sources – few people who retire do so with hundreds of thousands of dollars sitting in their bank account that they withdraw to pay the bills. Understanding the many ways that you can make retirement work will help you to realize how it’s possible for so many people to retire well and without worry.

Employer supported saving

Though traditional pension plans are far less common than they once were, employers still offer benefits that are an incredible help with funding retirement. Unfortunately, far too many people don’t take advantage of them. In fact the numbers are embarrassingly small, even though these plans often match your retirement saving dollar for dollar. That’s like free retirement cash! Imagine being able to double your savings just by saving, and that’s what employer retirement programs offer.

Putting away for retirement through company matching is a way that people are able to retire comfortably and without having to put a huge amount of their income away. There are lots of different kinds of employer supported savings plans, including defined benefit plans and contributions based plans. Whatever the plan that your employer offers, its almost always worth taking advantage of it.

Compounding your savings

Interest is a powerful thing. If, over the course of forty years, you put away just $150 per month and keep it in a modest interest bearing account that yields five percent, then you’ll have over two hundred thousand dollars! Compound interest is an amazing thing, allowing money to grow magically over time, with little risk in many cases. The more you put away, the faster it grows.

Government plans

What most people think is that they’ll be able to rely on the government safety net for retirement. They assume that their federal benefits will be enough for them to retire on, without having to sacrifice their lifestyle. However government benefits aren’t nearly enough, nor were they ever meant to be. You will have to supplement that with funds from some other source in order to really be able to live comfortably. Imagine getting just under five hundred dollars a month to survive on, which was the maximum benefit amount in 2008 based on full time Canadian citizenship for forty years. If you’ve lived in the country for only part of your adult life or don’t get to that level of benefits for some other reason, then you’re really going to be in trouble.

The more money you make during your lifetime, the higher your benefits will be, but never high enough to survive on comfortably in retirement without some other form of income. Benefits from CPP max out at less than a thousand dollars per month. Oh, and don’t forget that those benefits are taxable income, so the take home is even less.

Part time work

More and more retirees are relying on part time work to help them make ends meet. This is a viable solution for many who haven’t put away enough cash, but it’s nowhere near to being ideal. When you retire, you want to actually retire! Keep in mind that health is a factor, and that part time work in retirement often pays a fraction of the rate that you made when you were in your career.

Get started: the earlier, the better

Starting early is by far the best strategy for saving for retirement. That means beginning to save in your twenties if possible. The longer you wait, the higher percentage of your income you’re going to need to put away in order to create the kind of retirement fund that you really need.

Depending on how old you are, what your past, present and future salaries are, and how much you’ve already got saved, you might have to put away anywhere from five to twenty percent of your income in order to create a comfortable retirement savings. That’s a big difference! Thanks to compound interest, those who start putting away money in their twenties are able to put away a much lower percentage than those who begin in their forties.

The earlier you start saving and the more you’re able to put away, the more likely you are going to be able to retire earlier. Though the retirement age is creeping up higher and higher it seems with every passing year, you will hopefully not have to wait quite that long if you plan ahead and can still be young enough to enjoy your retirement.

Your biggest key to your success is do something!

The BIG question

The biggest question to ask yourself is this one – how much are you willing to sacrifice today in order to ensure that you’re able to have the lifestyle that you want during the last twenty to thirty years of your life? Keep in mind that retirement is hopefully going to represent decades of your life.

It’s often quoted that you need a million dollars in the bank to retire comfortably. That’s a great number to throw a dart at, but it’s far better for you to sit down and calculate your retirement needs based on how much you’d like to live on and then go from there, factoring all of the possible savings opportunities we’ve listed.

Your retirement is unique, just as you are. Crunch your own numbers in order to figure out what your retirement looks like with the plan you’ve got in place right now, then figure out what adjustments you need to make in your plan in order to get the kind of retirement that you want.

For help and advice on how to save for retirement, call the financial experts at Morgan National 1-866-595-3533. For more information on retirement plans, visit “Wealth Enhancement“ page on this website.