The purpose of Money Talk is to improve readers' financial capability with research-based personal finance information.
Friday, March 16, 2018
Retirement Planning is a 40-Year Journey
Retirement planning has been described as a “40 (or more) year journey”
from the start of someone’s working life in their 20s through retirement in
their 60s (or beyond). However, it is actually much longer, if you consider how
long someone can live during retirement. Unlike shorter-term financial planning
goals like buying a car, a house, or saving for a child’s education, retirement
planning can literally take place for seven or eight decades (e.g., 20s through
80s or 90s).
of someone’s stage in life and where they are on their retirement planning
journey, five retirement planning principles are timeless and apply to
¨Set a Retirement Savings Goal- Once you set a goal, develop a retirement savings
action plan. Determine your savings need with a Ballpark Estimate calculation and then begin taking steps to
save the required amount.
¨Save Early and Often- Set up automatic savings plans through an
employer and/or investment company so that deposits are made regularly (e.g.,
5% of income every payday), regardless of stock market conditions.
¨Invest Part of a Raise- When you get a raise, bonus, freelance work
pay, or other increase in income, invest half of it. If your employer offers
“auto escalation,” sign up so that increases in savings take effect
¨Don’t Delay Savings Any Further- It’s never too late to start investing for
retirement. If you haven’t saved anything yet for retirement, the best day to
get started is today.
¨Stay Educated About Retirement Planning- Changes to Social Security rules, Medicare,
and retirement savings plans are not unusual so it is important to stay up to
date via financial publications, media, social media, etc.