On retirement and preparing for your ‘nest egg’

NO career lasts forever. However dedicated individuals might be their professions, health and other concerns will eventually limit their ability to work.

When that time comes, it is unlikely that seniors will be able to rely on their Social Security pension to live comfortably in retirement.

The Social Security Administration (SSA) estimates that the average beneficiary receives about $15,600 a year. That leaves about a $20,000 annual shortfall for a retired couple planning to live off of the median household income of about $50,000. Factoring in some interest, they would need to set aside about $450,000 to fund 30 years of retirement. The exact amount a person would need to stop working while living comfortably can vary greatly depending on their intended lifestyle, projected healthcare costs and other expenses.

The importance of saving has increasingly resonated with Americans, according to a study released by Bankrate.com on March 28, 2016.  Their research shows that the number of people saving at least 10 percent of their income grew to 28 percent, compared to 24 percent in 2015. Meanwhile, the number of Americans saving 5 percent or less dropped from 28 percent to 21 percent.

“The bad news is that 21 percent of employed Americans claim not to be saving any of their paycheck,” said Bankrate.com Chief Financial Analyst, Greg McBride in a statement announcing the study. “Nothing for retirement, nothing for emergencies, and nothing for other financial goals.”

Most experts recommend that people begin saving as early as they are able to provide as much time as possible for their wealth to grow, according to a special money and retirement edition of AARP magazine. In addition, the Internal Revenue Service (IRS)  places limits on how much people can pay each year into an Independent Retirement Account (IRA), 401(k) plan, and other retirement funds.

In 2013, 45 percent of working-age households did not have any retirement account assets, according to a study by The National Institute on Retirement Security (NIRS).

In order to combat what the NIRS and others have called a retirement savings crisis, lawmakers in California proposed legislation last March 28, that would create a state-operated 401(k) plan, according to the Los Angeles Times. Senate Bill 1234 calls for the creation of the California Secure Choice Retirement plan, which would be available to workers at companies that do not offer savings plans with 5 or more employees.

Those getting a late start at retirement planning should consider setting aside more of their income by reducing their expenses, according to AARP.

Workers over 50 can make catch-up contributions that allow them to pay more into their IRAs each year than younger people.

There are also benefits to delaying retirement.  Working longer allows more income to contribute to retirement. In addition, Social Security benefits increase 8 percent for each year a person delays retirement.

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