Retirement plans have more to do with how much money is invested for retirement and less over how many trips a year you'll take once you've retired. For without the first, the latter will certainly be only a faded dream.
Retirement planning starts young, according to financial experts. Those in their 20's can accrue a significant sum with regular investment across a broad range of stocks and bonds.
Forget that one lucky strike as a way to a secure retirement. Not even the best investment expert can tell you which new stock is the sure thing that will turn a small sum into a vast fortune.
* Medicare and most Medigap insurance policies do not cover such items as eye glasses and prescription drugs. Plan now to pay more for health care costs after retirement.
* The American Savings Education Council has developed a work sheet to help figure out how much money is needed for retirement. An Internet version is available at www.ASEC.ORG (Click on the Ballpark Estimate button). A Spanish-language version is available.
* The Social Security Administration mails a benefits statement to workers 25 and older a few months before their birthdays. If you haven't received an estimate, you can request one online at www.SSA.GOV or by calling (800) 772-1213.
Instead, consult a financial planner for advice on stock and bond funds, real estate investments and other securities that can ride the ups and downs of the economy.
Retirement is changing greatly for the next generation of retirees. Unlike the generation now retired, fewer retirees will have pension plans that will continue to pay a set amount for the duration of their lives. Personal savings, whether through Individual Retirement Accounts or through the widely used 401(k) plans, will account for a greater percentage of retirement income.
Workers, though, indicate that 44 percent are looking to personal savings for their main source of retirement income, followed by 21 percent with an employer-funded pension, 13 percent Social Security and 9 percent from employment.
What counts most in retirement is the standard of living that one is expecting.
The survey indicates that 17 percent of retirees have a much higher standard of living than expected at the time of retirement, while 34 percent say their standard of living is a little bit better than expected, 26 percent the same as expected and 10 percent less than expected.
Of those who say their standard of living is less, nearly 40 percent point to higher-than-expected expenses, and about one-fourth citing higher-than-expected medical expenses.
WORKING A LITTLE LONGER
The current generation of workers expects to work longer than retirees.
Nearly a third of retirees stopped working before age 60, according to the survey, while less than a quarter worked to age 65 and beyond.
Less than 20 percent of current workers expect to retire before 60, while more than 45 percent expect to work to age 65 and beyond.
Additionally, 24 percent of retirees say they have worked since retiring - 4 percent full-time, 17 percent part-time, 2 percent both full and part-time and one percent seasonal.
The current generation of workers indicated that 66 percent expect to work for pay after retiring, with 45 percent citing health insurance, 33 percent for money for extras, 33 percent to make ends meet and 15 percent to help support their children or other family members.
So how well are workers saving for retirement?
"Older workers age 40-58 are more likely than younger workers ages 20-39 to report that they or their spouse have saved for retirement; yet those 20-39 plan to retire earlier," said Dallas Salisbury, president of the Employee Benefit Research Institute.
The survey, though, indicates that the older workers group is no more likely to have a realistic estimate of their income needs in retirement.
Financial experts say retirees will need at least 70 to 80 percent of their pre-retirement income to maintain their current lifestyles.
More than 40 percent of respondees thought they would need anywhere from less than 60 percent of their pre-retirement income to less than half that amount to maintain their current lifestyles.
Additionally, financial experts point out that Medicare does not cover nearly as much of medical expenses as employer-provided health plans. The costs for prescription drugs could easily add another 20 to 30 percent to their income needs, meaning that retirement income should match current income to maintain the current living standard.
The survey indicates that few workers are on their way to accumulating savings sufficient to pay for that retirement.
The survey indicates that nearly half had accumulated less than $50,000 with 15 percent saying that they had saved nothing for retirement.
Less than one-fourth of the 40-59 age group have saved $100,000 or more, which means that if they retired today, they would be able to draw $5,000 a year for 20 years before depleting their retirement savings.
SO WHAT TO DO NOW?
First, if your employer offers a retirement plan such as a 401(k), participate. If the employer matches a percentage of the employee's contribution, that instantly doubles the minimum contribution.
Additionally, check into such savings vehicles as IRA's, both regular and Roth, to determine if you are eligible to participate in them, and which would be the most beneficial to you.
Brainerd Dispatch ©2013. All Rights Reserved.