As an Investment Advisor, it’s our job to help clients plan how to pay for their lifestyle after they retire, given their goals, expected longevity, inflation and the rising cost of healthcare.
Experts suggest putting aside enough money to replace 80% of your current income for every year you anticipate being retired. For example, if your current annual salary is $100,000, you will need to find ways to receive at least $80,000 in income each year after you retire. About a third of the “nest egg” may come from Social Security, if the benefits are still available when you retire. But the rest must come from other sources, as shown in the chart below.
One of the easiest ways to increase those assets is to let time work for your advantage. When you start saving as early as possible and retire when you’re ready, rather than when you turn a certain age, you gain time to earn interest on not only your original investments, but also on any interest, dividends, and capital gains that accumulate—so your money can grow faster as the years roll on. This process is known as “compounding.”
Consider the case of retirees Sam and Sally*:
In this scenario, both Sam and Sally decided to retire at age 65. Even though Sally saved twice as much each month as Sam, he retired with $170,000 more because he started put money aside 16 years sooner.
The time for putting together a plan for your retirement is always now! Call us at JPS Newton at 503-476-7811 to make an appointment to talk with us.
*For reference, the illustrations assumes a retirement age of 65 and that the individual receives the monthly retirement payment shown until age 90. The amount saved until retirement assumes an annual investment return of 6%. The monthly payment amount in retirement assumes an annual investment return of 5%. The investment performance shown does not represent the return of any particular investment and does not guarantee any future rate of return.
The final account balance does not reflect any taxes or penalties that may be due upon distribution. Withdrawals from a tax-deferred account before age 59½ are subject to a 10% federal penalty tax unless an exception applies.