Retirement Planning

If asked how you've prepared for your retirement, what would you say? Too often, folks' answer, "I can hardly live on my paycheck now. I can't afford to save for retirement."

    The response should be, "Can I afford not to?"

    As "baby boomers" approach retirement, they face some problems hardly known in the past. First, some speculate that Social Security will ultimately be changed to provide less benefits than now. True or not, Social Security is regarded by many as a less certain benefit than before.

    Companies used to treat retirement plans as a way of life. Today, competition makes more companies see retirement plans as an unjustifiable drag on bottom line profits. Many are getting out of the retirement business.

    Some retirees have retirement packages in their companies' profit sharing arrangements, and they own stock in the company. If too much of a fund is in one stock, temporary market fluctuations can cause great losses. Retirees should diversify their funds.

    Now individuals must assume responsibility for their retirement.   Luckily these tools are available:

Existing Benefits - if your employer has a plan, do not discount it. You can decide how to supplement it by asking your company's financial or human resource office what benefits you get when you retire. Numerous calculation aids are also at libraries or on the Internet. Also, Social Security, despite its problems, is not likely to disappear.

Thrift Plans - companies and government entities offer plans where employees invest money tax deferred until they are 592 or some other set age. These include 401 (k) plans. Some of these plans offer matching funds to a certain percent of salary.

IRA - Individual retirement accounts allow savings of up to $2,000.00 per year, pre-tax, for retirement. Some individuals may not qualify if other retirement options are available, but post tax IRAs may still be used. The IRA contribution is taxed, but the interest accumulates tax deferred. Your tax advisor can assist you in assessing new products such as the Roth or education IRAs.

    Bewildering? Perhaps. The best advice is to get started saving if you haven't already. Do not agonize over the best possible investment if it prevents you from saving in some deferred plan. If you have started, work toward maximizing your contribution to any tax deferred plan and diversifying it.

    The benefit is money earned while the account is tax deferred.   Assume you start save $2,000.00 a year in a tax deferred account from age 20, to retire at 61. Assume you are a 18% bracket taxpayer, and your return will average 10%, with inflation at 3.5%. With these assumptions, upon retirement at 61 you will have accumulated more than $1,075,000.00. Note that only 82,000 was invested, the interest did the rest. If all these assumptions stay the same but you did not get started saving until age thirty, the account will reach about $402,000.

    If you think you cannot afford it, start small, just to get into the habit. Then increase your amount as you get raises or bonuses- so you won't notice the contribution in your take home pay.

	SOUTH CAROLINA DEPARTMENT OF CONSUMER AFFAIRS 3600 Forest Drive, 3rd Floor P.O. Box 5757 Columbia, SC 29250 (803) 734-4200 or (800) 922-1594 (toll free in S.C.) Teletips (803) 734-4215 or (877) 734-4215 (toll free in S.C.) Requires Free Adobe Reader 5.0 Or Later/ *Requires Microsoft Word Viewer


	RETIREMENT PLANNING
MORTGAGE FRAUD HOTLINE 1-800-553-7723 *SCDCA TV* Ask Consumer Affairs Click Below Teletips RECORDED CONSUMER INFORMATION (803) 734-4215 or (888) 734-4215 (toll free in S.C.)		If asked how you've prepared for your retirement, what would you say? Too often, folks' answer, "I can hardly live on my paycheck now. I can't afford to save for retirement." The response should be, "Can I afford not to?" As "baby boomers" approach retirement, they face some problems hardly known in the past. First, some speculate that Social Security will ultimately be changed to provide less benefits than now. True or not, Social Security is regarded by many as a less certain benefit than before. Companies used to treat retirement plans as a way of life. Today, competition makes more companies see retirement plans as an unjustifiable drag on bottom line profits. Many are getting out of the retirement business. Some retirees have retirement packages in their companies' profit sharing arrangements, and they own stock in the company. If too much of a fund is in one stock, temporary market fluctuations can cause great losses. Retirees should diversify their funds. Now individuals must assume responsibility for their retirement. Luckily these tools are available: Existing Benefits - if your employer has a plan, do not discount it. You can decide how to supplement it by asking your company's financial or human resource office what benefits you get when you retire. Numerous calculation aids are also at libraries or on the Internet. Also, Social Security, despite its problems, is not likely to disappear. Thrift Plans - companies and government entities offer plans where employees invest money tax deferred until they are 592 or some other set age. These include 401 (k) plans. Some of these plans offer matching funds to a certain percent of salary. IRA - Individual retirement accounts allow savings of up to $2,000.00 per year, pre-tax, for retirement. Some individuals may not qualify if other retirement options are available, but post tax IRAs may still be used. The IRA contribution is taxed, but the interest accumulates tax deferred. Your tax advisor can assist you in assessing new products such as the Roth or education IRAs. Bewildering? Perhaps. The best advice is to get started saving if you haven't already. Do not agonize over the best possible investment if it prevents you from saving in some deferred plan. If you have started, work toward maximizing your contribution to any tax deferred plan and diversifying it. The benefit is money earned while the account is tax deferred. Assume you start save $2,000.00 a year in a tax deferred account from age 20, to retire at 61. Assume you are a 18% bracket taxpayer, and your return will average 10%, with inflation at 3.5%. With these assumptions, upon retirement at 61 you will have accumulated more than $1,075,000.00. Note that only 82,000 was invested, the interest did the rest. If all these assumptions stay the same but you did not get started saving until age thirty, the account will reach about $402,000. If you think you cannot afford it, start small, just to get into the habit. Then increase your amount as you get raises or bonuses- so you won't notice the contribution in your take home pay.


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SOUTH CAROLINA DEPARTMENT OF CONSUMER AFFAIRS

SOUTH CAROLINA DEPARTMENT OF
CONSUMER AFFAIRS