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The Retirement Problem: Why to start saving now

The Retirement Problem: Why to start saving now. By: Lauren Wederich Lwederich@gmail.com. Why Start Saving Now?. 54% of workers have less than $25,000 saved, excluding the value of their home and any defined benefit plans.

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The Retirement Problem: Why to start saving now

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  1. The Retirement Problem: Why to start saving now By: Lauren Wederich Lwederich@gmail.com

  2. Why Start Saving Now? • 54% of workers have less than $25,000 saved, excluding the value of their home and any defined benefit plans. • But I want to save for my child’s education instead. However there are student loans, no such loans exist for retirees. • Expecting to die young is NOT a retirement plan • But there’s Social Security, right? According to the 2010 trustees report from the Social Security Administration, Social Security reserves will run out in 2037. Today, full Social Security benefits barely allow seniors to surpass the poverty line. • If you think you will just keep working into your old old age… Think again, Studies show that the reason people retire early has to do with health issues more than anything else. You never know what your health is going to be in the future. • If you straight up have too many expenses to pay than to save for retirement then maybe you should consider some good old fashioned budgeting. • http://www.foxbusiness.com/personal-finance/2011/03/04/6-excuses-saving-retirement/

  3. My Retirement Plan: If I Start TODAY • Age I Start My career: 22 Years Old (if I get a job right out of college) • Age of Retirement: 70 years • Initial Starting Salary for a Marketing Manager: $43,325 • Years Worked until Retirement: (70-22) 48 Years • Average Inflation Rate: 4.07% • Average Stock Return Rate: 8.26% (70 year average) • Life Expectancy Average: 90 Years old • Annuity needs to accommodate up to: (90-70) 20 Years

  4. Choosing a Retirement Plan: Roth IRA • With a traditional IRA, your contributions may be tax-deductible and can grow tax-deferred. With a Roth IRA, your contributions are non-deductible, but have the potential to grow tax free. • It makes the most sense to use a Roth IRA • Starting Salary Equivalent Value at the Time of Retirement: $294,012.09 • Doubled: $588,024.18(to account for bonuses and raises) • Annuity: $411,616.93 per year (70% of projected current income when I am 70 years old ) • Total Minimum Retirement Investment: $2,891,955.86

  5. My Roth IRA Starting Today • Maximum Contribution allowed by law: $5,000 • By Year 48 I will have saved: $2,891,955.86 which is more than enough to retire on • I also do not have to pay tax on this investment when I withdrawal it from the Roth IRA account.

  6. If I Start in 10, 15, 20, 25 Years… If I wait 10 years, I loose almost half my investment If I wait 15 years, I will not have nearly enough to retire on.

  7. How Much Needs to Be Invested If Waited 10, 15, 20, 25 Years

  8. How Much You Would Have to Pay Per Year to Save Enough To Retire On Any amount over $5,000 cannot be saved in a Roth IRA account. Therefore, the extra savings would need to go in a separate account which would include tax deducible when withdrawn for retirement. This means you would pay a lot more money to the government for tax than if the savings occurred in the Roth IRA account. Proving it saves to start saving sooner.

  9. Sources Used in Presentation • http://moneycentral.msn.com/investor/calcs/n_expect/main.asp • http://gosset.wharton.upenn.edu/mortality/perl/CalcForm.html • http://www.ssa.gov/cgi-bin/longevity.cgi • http://www.bls.gov/oes/current/oes112021.htm • http://www.moneychimp.com/features/market_cagr.htm • http://www.foxbusiness.com/personal-finance/2011/03/04/6-excuses-saving-retirement/ • http://www.bankrate.com/finance/retirement/why-save-for-retirement.aspx • http://finance.yahoo.com/focus-retirement/article/112212/stop-saving-so-much-for-retirement?mod=fidelity-readytoretire&cat=fidelity_2010_getting_ready_to_retire • http://www.edwardjones.com/en_US/products/retire/individual_plans/plan_comparison/index.html?WT%2Esrch=1&utm_source=google&utm_medium=cpc&utm_term=roth%20IRA%20traditional%20IRA&utm_campaign=Products&gclid=CKW059vDwqcCFYx_5QodsHRmig • https://personal.vanguard.com/us/whatweoffer/ira/whichira?Link=facet • http://www.bls.gov/oco/ocos020.htm

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