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by David C Lewis, RFA

Most Americans rely on individual 401k plans for the bulk of their retirement. A serious problem with 401K plans is the investor’s reliance on employer matching for the plan. This may cause an employee to rely too much on the employer and not contribute enough to savings. But, if you have not taken a serious look at retirement planning yet, nothing will give you a wake up call like using one of the many retirement calculators available on the internet. Retirement planning, which is essential for every adult, certainly is a difficult task and shouldn’t be taken lightly.

Because there are so many variables in preparing a financial plan for retirement, the process can be difficult, at best, even when you are using a professional advisor. Some of these variables are: the age at which you retire, the age at which you start your savings, the amount you save for retirement, how much your retirement savings earn over the years and into retirement, how much debt you have, if any, at the age you plan to retire, and the quality of your health entering retirement and how long you live after retirement.

Government inflation of the money supply also means you have to account for inflation. That can be hard to do. There are many retirement calculators on the internet to help you though. What most of the calculators will show you, however, is that Social Security – for the most part – will not cover very much of your retirement. You will have to save a lot more money to have even a semi-comfortable retirement.

If the economy is able to grow enough to outpace inflation, your investments must be able to keep up. Even still, with inflation running 3%-5%, your investments are losing value and struggling to keep up.

$50 a week used to be a “normal” wage. Even during mid-life that amount of income had increased to $200 a week. Now, however, you would not even think of trying to live off of $200 a week, let along $50/week.

Average Americans making $500 to $1,000 per week today will see the same kind of results that their parents and grandparents are seeing now, unfortunately. The retirement calculators are showing that they should have a retirement nest egg of close to a million bucks if they want to retire comfortably for 20-30 years.

An online calculator tested online showed that an adult starting with assets of $100,000 and adding $4,000 year to that would enter retirement with almost $900,000 but end up broke by age 85.

Part of managing your existing income is being able to save money and still having access to it when you need it (sometimes hard to do inside a 401K), and still being able to invest for your retirement (though here, a tax deferral helps). Estimating your retirement income and expenses can be extremely difficult, however, there are many different sources of information and assistance available on the internet to get you started.

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