Thursday, November 18, 2010

The Nest Egg

Mega disclaimer: I have no formal education regarding retirement, 401k's, 403B's, stocks, bonds, etc. etc.

One of my biggest motivations for being so diligent about saving money is retirement. I started saving for my retirement when I was in college. Most people aren't quite as crazy as me and often don't give retirement much thought. Hopefully the following suggestions will help you feel comfortable getting started with your retirement savings.

A general rule of thumb is to save 15% of your salary for retirement. If you have company matching, this number isn't as scary as you'd think.

That being said, each person's situation is different, and you should plan for retirement accordingly. Here are factors you should take into consideration when deciding how much to save:

1.Your Current Age: The older you are when you start saving the more you will need to save.

2.Your Retirement Age: The longer you plan to work the more you will continue to put away for retirement.

3.Your Life Expectancy: OK, so none of us really knows when we will die (unless one of you has a working crystal ball I don't know about), but family history, health and lifestyle can help you realistically prepare.

4.Your Current Savings: This one relates back to your current age and when you started saving. If you started young and were very aggressive you may not need to save as much when you get older.

5.Your Investments: So where did you put the retirement money? If it is under a mattress somewhere, (do people still do that?) then you probably didn't get any return on your money unless you count the change you found in the couch cushions. If you put your money to work for you then you probably won't have to save as much.

6.How Much Income You Need for Retirement: What are your plans for the retirement: traveling, living the high life, downsizing? Those choices will all affect how much you need to save.

7.Your Current Income: Your current income my not reflect how you want to live your retirement. For example, I work for a non-profit and don't make a lot of money. I don't want to have to scrape by in retirement so I save more than 15% for retirement.

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