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Hands On Retirement Planning

Category: Articles Published: Thursday, 26 May 2011 Written by Administrator

Hands on Retirement Planning By Steven Wightman, Certified Finnancial Planner

Note: In life, the old Chinese proverb says; “A thousand mile journey begins with the first step.” Trouble is, when it comes to retirement planning, most of us never take that first vital step. Others start and stop - as soon as it becomes inconvenient. Procrastination ruins the best ideas. Most agree; the biggest inconvenience in life is poverty – a place where the majority of Americans end up, not because they planned to fail, but because they failed to plan and execute that plan just as an athlete does. No excuses, just the road ahead!

 The purpose of this exercise is to help you arrive at a rough estimate and to get you started. The first step is a giant one in the direction of your future. To simplify, we have removed the costs associated with investing and taxes. We assume you will employ tax-deferred savings vehicles such as retirement accounts and variable annuities.

 Consider that millionaires spend an average of 4 hours each month planning their finances and their future, should you? The results speak for themselves: To have the body of an athlete, you have to train regularly. To have the mind of a millionaire, you have to think and act like one – starting now. Why? From the table below, you may learn that 1 million or more is what you’ll need to save to retire and maintain your current standard of living.

 Smart financial planning can yield a multiple of your total life earnings into your savings. Example: $10,000 invested in the entire stock market 40 years ago would be worth 1 million dollars today - through the miracle of compounding. For the average college graduate, cutting your taxes in half early in life can yield another million dollars in your account. You get the picture…

 Bonus: One last incentive for acting now: The Federal Savings Credit is available to those who qualify (see table) for up to one thousand dollars per taxpayer in addition to your regular tax deduction for contributing to your retirement plan. Catch? You must open and fund a plan by April 15th.

 Make the golden years truly golden with these easy retirement planning steps:

How much will you need?

See table B for a reality check.

Figure what you need to save each year. J/C

Choose an asset allocation

Open a retirement account and start dollar-cost averaging with monthly purchases

Pay yourself first with payroll deduction

Save 10-20% of gross income

Monitor at least quarterly

Work with a CFP Pro to coach you

Start now! First year savings allow compound-ing the longest. 10k x 40 Y = 1 million

X

X

X

X

X

X

X

X

X

CFP

CFP

X

CFP

X

X

 

 

 

 

 

 

 

 

Most financial Institutions

Assume tax-deferred savings.

Morningstar Quicken.com

Major brokerages

Credit unions and banks offer this

Morningstar Quicken WSJ brokerages

FPA NAPFA

Friend & work network

Any Brokerage firm can help you.

Some lessons from a pro: When it comes to your retirement, don’t rely on anyone but yourself, i.e. an inheritance, or a marriage, and don’t put it off! Your future is just too important to be left to chance. Today, more than ever, there are wonderful planning tools available to you in books and on the web and there are now 40,000 + Certified Financial Planner Licensees. The future is welcomed by those who prepared for it and feared by those who have not. Be the former and live a great life.

A

B

C

D

E

F

G

H

I

J

Planned retirement age?

Current age?

# Years to SAVE for retirement?

A-B =

Annual expenses?

Less annual expected Soc. Sec. dollars

Less all other annuities annually

Annual need.

D-(E+F)

Number of years you expect to live in retirement

Total estimated need?

=G x H

Total Est. funds need to save?

(C x I ) – current savings & investments

Adjusted Gross Income Limits for the Savings Credit for years 2002-6

Married Filing Joint

Head of Household

All Other Filers

Credit

$0-$30,000

$0 - $22,500

$0 - $15,000

50% of contribution

$30,001 - $32,000

$22,501 - $24,375

$15,001 - $16,250

20% of contribution

$32,501 - $50,000

$24,376 - $37,500

$16,251 - $25,000

10% of contribution

Over $50,000

Over $37,500

Over $25,000

Credit not available

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