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>> Welcome to Making Cents,
an investor education program of the Burlington County Library.
I'm Carole Glade, a financial educator.
Retirement is an important financial stage that many people are facing.
Planning for retirement is a process that starts early in life.
Since most people are not employed during retirement,
they must make a retirement paycheck through effective investing and planning.
Investing is typically done to achieve long-term financial goals,
such as funding for a child's education and retirement.
People may also choose investments
that provide a stream of income, typically in retirement.
Investing helps build wealth over time so you have the financial assets
to live a good quality of life when older and not working.
When deciding to retire, you'll need to think about several factors.
Look at your current age, your planned retirement,
and your estimated life expectancy.
What will be your sources of retirement income
and how much income will you need each year for your retirement?
How much do you have saved or invested now
and how comfortable are you at taking investment risk?
Retirement may last many years,
so being financially prepared will make the transition easier.
Other factors to consider will be your health
and that of your spouse, partner, and family members.
Do you have caregiving responsibilities?
What type of pension or retirement benefits are you eligible to receive?
Think about the cost of health insurance and other financial assets
you can tap to pay for retirement,
and each person needs to decide how and when they define retirement.
Does it mean that you'll stop working at 62 or will you work until you're 90?
Obviously the more money saved for retirement the better.
What are your sources of retirement income?
Most people have some social security benefits that will be paid when retired.
Retirement plans, such as pensions, 401Ks and IRAs
or individual retirement accounts also need to be considered.
Enroll in these programs when you're younger to prepare for retirement.
Personal savings, investments, and other assets,
such as real estate, are also sources of income.
Annuities and employment income from working
or owning a business may also be available to you.
This pie chart from the social security administration
shows the composition of an average U.S. Retiree's annual income.
Social security, while the largest slice in the pie chart,
provides only 27% of the average income.
Pension benefits provide 18%.
So far we've talked about preparing for retirement by saving and investing.
Now it's time to talk about taking money out.
This is a very important part of retirement planning.
Take out too much, too soon, and you run the risk of outliving your assets.
Take out too little and you are being unnecessarily frugal.
Research suggests that if you withdraw 4% of your savings each year
when you retire there's a probability
of not outliving the assets within 30 years.
Conservative investors should withdraw less.
However, because their money won't grow as fast
according to historical averages,
you may want to reduce those numbers.
These numbers are very daunting
and often provoke a somewhat stunned response, but they are accurate.
Applying the 4% rule for ever $1,000 of monthly income
you want to supplement social security or a pension,
you need $300,000 saved
because 4% of $300,000 is $12,000 or $1,000 per month.
Many people find themselves short of the amount of money
they need to live comfortably in retirement.
In this situation, it may be wise to work longer,
if you can, either by postponing retirement or working part-time.
Other strategies to close the gap are reducing living costs,
particularly the cost of housing
and converting assets into income,
such as with a reverse mortgage that is secured by the equity in your home.
Preparing for retirement while you are younger is very important.
We need to save and invest early to let our money grow.
We can't rely on social security as our only income during retirement.
Evaluating when to retire, the age of retirement,
your life expectancy and funds available are all important decisions.
By retiring later you'll have more of your working years
to earn income and for assets to grow.
And remember the consensus is that for every $1,000 of income
you want to have when retired,
you'll need $300,000 in assets to make that happen.
Preparing for retirement and saving and investing today
are important financial decisions.
Thanks for joining me today.
More information on this and other money management topics
is available through the Burlington County Library,
through the Making Cents website.
Visit or contact the Burlington County Library for more information.
This program was brought to you by the Burlington County Library System
with funding from the American Library Association
and the FINRA Investor Education Foundation.
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