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Why it’s important to save for retirement

While retirement may seem far off in the distance for some, financial experts say you’re never too young to begin saving.  In fact, the earlier you calculate your retirement needs and start building your nest egg, the easier it will be to create a viable plan for the future.

Many experts advise you begin saving a percentage of your income for retirement as soon as possible, no matter how little the contribution may be, as it’s possible the Social Security benefits millions of people currently depend on may be in jeopardy.

If changes to the program are not made in the next few years, it is believed it won’t be long before Social Security will pay out more than it receives from payroll taxes during the year, which will put the program, as well as your financial future, at risk. You may not be able to depend on Social Security as your sole source of income, advisors say, and expect to live comfortably during your retirement.

This concern, as well as the possibility of a reduction in traditional pension programs and fluctuating investment returns, can seriously affect how you live during your golden years.

Financial advisors estimate you will need between 70 and 90 percent of your pre-retirement income to retire comfortably.  If you currently earn around $70,000 per year, for example, it is estimated you would need to have at least $50,000 a year available each year in retirement for living expenses.   At the end of 2011, it was estimated that a 65-year-old would have needed to have saved more than one million dollars in order to withdraw $50,000 each year, taking inflation in consideration.  Of course, additional calculations would have to be made if you carry credit card debt or will still maintain a mortgage payment during retirement.

Some advisors suggest people take the secure route and diversify their financial portfolio by investing money in different types of savings programs, such as a 401(k) or an Individual Retirement Account (IRA) such as a Traditional or Roth IRA, which include tax benefits.  Setting up an old-fashioned savings account at a local bank or credit union is also an excellent addition. 

Contributing to a savings account, even if it isn’t a large amount of money each month, allows you to take advantage of the benefits of compounding interest.  As the interest accumulates each year, it is added to the principal, giving you even higher returns.

If you tend to spend your cash by the time your next paycheck arrives, try making small payments to your own savings account monthly, as if you were paying a bill; or have a specified amount automatically deposited into your savings each pay period so you don’t spend it too frivolously.

With uncertain returns on investments and the constant increase in living and medical care costs, it’s vital to create your own savings plan, and the earlier you determine your retirement needs and begin saving, the easier it will be to reach your retirement goals.

About the article contributor: America’s Debt Help Organization at is a company that helps people become more knowledgeable about their financial well-being. For All Your Debt Settlement and Debt Consolidation Needs.

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