30 years to retirement
Will we make it? Some things to know about investing for later-life.
If you’re one of those types of people who has ever worried about anything, chances are you have worried about whether or not you will have enough money to make it to the end of life after you finally decide to retire. Do you know if you will have enough? Here maybe this will help. According Rutgers University newspaper “Financial Fitness for the Best Rest of Your Life: What older adults Need to Know About Money”, in order to provide $1000.00 of monthly income you would need to set aside $300,000.00. This is under the assumption of a 4 percent annual withdrawal rate. Here’s their example calculation: $300,000 x .04 = $12000 per year or $1000 per month. How close are you to maintaining your current lifestyle? If you think about the above it would take an additional $300,000 for every $1000 of additional income per month.
What are some steps you can take to help get to your decided income? First, the earlier you start the better; a great example can be seen at investopidia.com. Second, according to the Rutgers University newspaper, stocks and stock mutual funds have earned two to three times the return of bonds and money market funds historically. The downfall, with increased risk comes an increased risk of loss, so be sure to consider your risk tolerance before deciding on an investment plan. Third, if your employer offers a retirement plan that includes matching make sure to maximize your contribution to receive the maximum match from your employer. There is no sense in passing up free money.
Some additional steps to help you along the way are: Hire a professional advisor, especially if you are new to investing. Do your homework before hiring an advisor. Some good sites to find advisors include The National Association of Personal Financial Advisors, Certified Financial Planner Board of Standards, and Financial Planning Association. The Rutgers University paper suggests consolidating scattered retirement plans so you can better track your investments.
The key to maintaining your current lifestyle is being disciplined to invest money at an early age by making use of the investment tools and opportunities available. Set your retirement goal and act on it!
Michigan State University Extension offers financial management and home ownership education classes. For more information of classes in your area, go to either the MSU Extension events page or the MI Money Health website.