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“Retirement” is part of every wealth management plan, and for good reason. Building, growing, and protecting wealth is as much about planning ahead - sometimes way ahead - as it is considering present-day options and actions. Since retirement is the goal post toward which most of us aim our wealth building activities, it only makes sense to start early. And if it is already too late to start “early” then “now” is still the first possible moment to plan for everything that lies ahead - at any age.
Retirement may seem a long way off, but you owe it to yourself to look far ahead and begin taking some simple steps today that will lay the groundwork for a thriving retirement tomorrow. Even if time seems to be on your side, just ask some retirees if they have any words of wisdom and they will probably tell you that saving for retirement is not quite as simple as it sounds.
Here are 4 important things to consider:
1) Inflation. While you may be aware that, over time, inflation can erode savings, you may not realize the even more potentially serious effects of inflation. For instance, at 3% inflation, $100 today will be worth only $67.30 in 20 years - a loss of one-third of its value. After 35 years, this amount would be worth a mere $34.44. For this reason, it is important to utilize retirement savings tools that are most likely to outpace inflation.
2) Taxes. Current income, tax bracket, and differences among tax-deferred retirement savings plans all play a critical role in how much money you can hope to save for retirement. By maximizing pre-tax contributions to employer-sponsored plans and Individual Retirement Accounts (IRAs), you can help take advantage of the tax-deferred benefits of such plans.
3) Discipline. It takes personal discipline to start and maintain a saving habit, but those who do often report that it is the single greatest factor in predicting retirement success. By making regular contributions to your employer-sponsored retirement plan and your IRA, you can maximize the power of compound interest (the interest earned not only on the initial principal but also on the accumulated interest from prior periods). With consistent contributions, your retirement savings have a greater chance of accumulating to meet your long-term goals.
4) Personal Savings. Social security typically provides only a percentage of retirement income. Also, in the event that the effects of inflation (see #1) eat into your retirement plan income, it would be wise to avoid a potential shortfall by supplementing traditional retirement income sources with personal savings.
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