There are two primary factors that affect how long your money will last and how much money do you need to retire. One is inflation, and the other is taxes. Both of these factors are a certainty you can’t ignore.

Inflation means your retirement dollars will buy less, so you’ll need more retirement dollars just to stay even. For example, let’s say you’ve got a fixed retirement income of $25,000 a year. Inflation will eat into the buying power of that money in short order. Fixed income leaves you in a fix when it comes to inflation. You’ll need to grow your retirement income just to keep pace with the ravages of inflation. Certainly, you need better retirement income strategies to cope with inflation and taxes. Table below shows annual inflation for the past 25 years. (more…)

In developing a retirement plan there are several factors to consider in addition to the amount you need or want to save.

1. Income Taxes.

The above discussion did not take into consideration income taxes. You might have to save more if you have to pay income taxes on all or part of your retirement benefit or your contributions. Distributions from qualified employer plans are always subject to retirement income tax. (more…)

In just a few years, the first of an estimated 77 million Baby Boomers will become eligible for benefits and will have to make that decision. A full 32 percent of the workforce has no retirement savings set aside and 80 percent have no private pension. About two thirds of retirees receive 50 percent of their income from Social Security. Today about 20 percent of Social Security recipients rely on their checks as their sole source of income. Taking the Social Security check early at age 62 versus age 65 currently costs recipients 24 percent of their monthly social security benefits and that penalty is going up to 30 percent. Unexpected taxes and additional penalties can literally take away the rest. (more…)

Everyone is needed financial security in some current stage of their life. While financial security in retirement is involving more freedom from fear and anxiety about having sufficient financial resources in later life. Whether considered from an individual perspective or from a societal view, the attainment of financial security in retirement may hold challenges. (more…)

For Early Retirement Incentive Plans within a defined pension plan, the most common incentive is the addition of age or service credits in calculating pension benefits. Typically, “5 and 5”—adding five years to age and/or five years to length of service—is offered. Other incentives may reduce or eliminate the penalty for early retirement, provide cash supplements until an employee is eligible for Social Security (in the main, at age 62, though some plans bridge payments to age 65), provision of life insurance, outplacement assistance, and less often, retiree health benefits (Hewitt Associates 1997). (more…)

Early Retirement Incentive Plans extend the benefits offered to workers or give additional financial inducements that motivate employees to retire prior to the age or time they otherwise would retire. Early retirement incentive plans first appeared on the employee benefit landscape in the late 1970s and early 1980s. The nation was struggling with “stagflation,” and many firms sought to reduce their labor costs without resorting to layoffs. At the same time, the long-term trend toward earlier retirements was proceeding unabated. Many workers expressed a desire to enjoy the “leisure” that could be secured through the early retirement provisions of many companies’ defined benefit plans. (more…)

The Group Retirement Account (or “GRA”) and the Group Supplemental Retirement Account (or “GSRA”) resemble the Retirement Annuity account and the Supplemental Retirement Annuity account in many respects. There are, however, some fundamental differences between the group accounts and their nongroup counterparts.

Both the RA and the Group Retirement Account are contracts with TIAA-CREF. (more…)

It doesn’t matter how much money that people could have, we all won’t ever be truly comfortable and secure enough for retiring. This is because we are unable to estimate the amount of money we will need in retirement. The single most frequently asked questions I get has to do with retirement. Particularly, everyone is questioning how much money to retire they have to have for retire comfortly and securely.

If you put your money in simple Certificates of Deposit for your retirement investment, a realistic rate of interest for these types of retirement accounts is an average of 6 percent. Assuming an inflation rate of 3 percent, you would have to put $30, 000 gained back into your principle of bonds and CDs, so that you will get the same sum of money each year after inflation.

In most parts of the US and with the average lifestyle of retires, this isn’t enough money to retire. The benefits are easy to understand–the reduce the interest rate, the lower your monthly payment and total cost of buying a home. When you have twice the amount in principle (2 million dollars instead of 1 million dollars), then you would be earning $60,000 a year after inflation. Let’s say you again no longer have a mortgage to pay, have a million dollars to invest earning an average of 6%, and need $60, 000 a year to live (and you need to increase this amount by 3 percent every year for inflation). Do you need more or less than $60, 000 a year to live in retirement? So this scenario is not a good retirement investment advice you will follow trough.

To make calculating even more difficult, it is unlikely that you will invest all of your retirement money in bonds and CDs. Let’s say after two years in retirement, you lose a large percentage of your investments from typical market volatility. This may force you to return to the work force in your silver light years.

Furthermore, you will have to expect unstable bills into your retirement calculations, such as periodic medical bills, an unusually expenses along life, a new car every decade or so, possible assisted living, and so on. You will likely need more income than anybody can reasonably predict, especially since it is nearly impossible to guess how long you will live with any accuracy and reliability.

Therefore, I hope I have convinced you to seriously think about how much money is needed when heading off retirement. And try to never touch your investment principle and always factor the rate of inflation, otherwise you may run the risk of not having sufficient money in retirement particularly if you live a very long life with a lot of medical bills. And if you are very conventional with your investments and way of life requirements, then you will need a minimum of two million dollars along with a home that is already paid to retire.

The short response to the question, “How much money do I need to retire?” is “It depends”. If there is a lack of money, you’ll need your cost savings to supplement them. If the sum required is greater than 4 %, then you definitely probably need to save more or push back your own retirement time. Every scenario differs from the others and unique.

Because Early Retirement Incentive Plans are not as widespread as they had been a decade or two ago, there are fewer reports detailing their dimensions. Price Waterhouse Coopers (2001) surveyed 114 firms in 2001 and reported that 12.3% had made such an offer to employees. Watson Wyatt surveyed 75 large companies in 1998–1999, finding that 61% had offered at least one ERIP in the previous ten years. In 2002, however, Watson Wyatt’s survey found that only 17% of U.S. firms had offered such plans in the prior three years. (more…)

The majority of firms offering Early Retirement Incentive Plans use a combination of years of age and service to define those eligible for a window plan offer. Or they may have a “magic number” that can be reached by different combinations of age and service. For example, if the number is 75, then a person aged 55 with 20 years of service and another aged 60 with 15 years of service would both be eligible. (more…)