Commerce urges Minnesotans to think about retirement planning
Despite the rising cost of retirement, research shows that seventy-five percent of Americans have less than $30,000 in retirement savings. The Minnesota Department of Commerce is urging all Minnesotans to either start or refresh their financial planning for retirement in conjunction with National Save for Retirement Week.
National Save for Retirement Week is a congressionally endorsed, national event aimed at creating a culture of saving in the workplace and community. The goals for National Save for Retirement Week are to raise the profile of retirement planning and promote the benefits of getting starting today.
"Whether you hope to travel the world or simply enjoy time with your family, the sooner Minnesotans begin planning for retirement the better," said Commissioner Mike Rothman. "This week provides the perfect opportunity for Minnesotans to get started. Simple steps such as avoiding credit card debt, matching your company's 401k plan, and knowing your retirement needs can go to great lengths."
As younger individuals face an increasingly complex marketplace and over 20 years of retirement, getting started can be intimidating. The Department Commerce advises Minnesotans to ask themselves a few simple questions to help envision what retirement life will look like. Once the kind of retirement lifestyle is established, then Minnesotans can start financially planning for their future.
Questions to consider:
Is your home paid for, or will you need to make mortgage payments?
Do you plan to move?
Do you plan to work part time?
Would you like to take up travel or a hobby, and if so, what are the expenses involved?
Will you need more or less income than you currently earn?
How many years will you be retired?
Know your retirement needs. Retirement can be expensive. Experts estimate that individuals need about 70 percent of your pre-retirement income - lower earners, 90 percent or more - to maintain the standard of living. The key to a secure retirement is to plan ahead.
Take advantage of employer's retirement savings plan. If your employer offers a retirement savings plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about what plan is available to you, and think about your needs. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to get that money?
Open an Individual Retirement Account (US) Individuals should look at the option to invest in individual retirement accounts (IRA) and talk to a financial advisor their own IRA options. Individuals can put up to $5,000 a year into an IRA - even more if you are 50 or older. However, you can start saving for retirement with much less. IRAs also provide tax advantages.
There are two types of IRAs - a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Contributions to Roth IRAs are made with taxed income, so future withdrawals are tax free, while contributions to traditional IRAs are made pre-tax, so future withdrawals are taxed at the tax rates set at that future point in time. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.
Find out about government benefits. Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. For more information, visit the Social Security Administration's website (U.S.). Social Security is an essential part of retirement income for the large majority of Minnesotans, so make sure you understand what options are available to you.
Ask Questions. While these tips are meant to point you in the right direction, you'll need more information. Talk to your employer, your bank, your union or a financial adviser. Ask questions and make sure you understand the answers. Get practical advice and act now.