Why You Need a Retirement Plan

The quality of life you want in the future depends on what you contribute in the present. I am sure you will want to retire happy and comfortably with personal and financial piece of mind. The last thing retirement should be is stressful for you and your family. The golden years as they are called today are a time where we sit back and enjoy everything we have worked for our entire lives. Therefore to truly enjoy and be able to reap the benefits of retirement, you have to start saving into a retirement plan immediately when you start your first job.

Why Save?

Americans are living longer than ever, and retirement is getting more and more expensive as the cost of living especially medical care, prescription drugs and inflation continue to grow. Look at the cost of gas as it seems to go up week after week. What will the cost to fill up a tank of gas be when you are ready to retire?

The U.S. Department of Commerce reports that the personal savings rate in the country has dropped to the lowest point in more than 50 years. This shows us that the average American will not have enough money to retire.

If you work at all during your retirement, it should be because you choose too, not because you have to. There are many cosmetologists that still own and work in salons and barber shops long past retirement years. The main reason is that the beauty industry keeps them young and being around people gives you the energy to survive and live longer. Unfortunately, many retirees find themselves still behind the styling chair doing the latter because their retirement income is not enough. Inflation, rising costs of living and taxes can all take away from retirement and being self-sufficient. The uncertainty with having enough to retire sits on your own shoulders. We will explain in detail how to help put you on the path to achieve your retirement goals.

Three Sources of Retirement-

Social Security The government set up a retirement plan through President Roosevelt over 60 years ago called Social Security. Unfortunately Social Security may not be around when you get ready to retire. The United States Congress is in the process of trying to stabilize and rebuild Social Security to insure that United States citizens have a government assisted retirement plan when they are ready to retire. According to Social Security administration, Social Security if still around will only provide  approximately 40 percent of the income you need for a comfortable retirement.

Company Pension Plans - Companies large and small have offered retirement pension plans for years. With the economic meltdown that we have seen over the last few years many have done away with such said plans. Government backed pensions for Teachers, Police offers and other government jobs are now in jeopardy as states and small municipalities are and will go bankrupt in the near future. Company pension plans are no longer the dependable retirement income they were once considered. For companies that still offer retirement plans they require that you work for the company for a number of years before they enter you into their pension plan. You will also have to stay at least several years before you are fully vested into their companies’ pension plans.

Individual Savings and Retirement investments-  The most common type of retirement account is your savings account. Savings account allows you to keep your money in a safe place while it earns a small amount of interest each month. These accounts require a low minimum investment to start.

The fact that you will probably not use this money for daily expenses you can feel secure while you watch your money grow because you money is insured by the bank. Banks and credit unions are insured up to $250,000 on each customer’s account. So you do not have to worry about your retirement savings diapering. The good news about savings accounts is that if you should need the money for an emergency you do have access without any penalties and no tax ramifications.

The most important thing about your savings is that your money grows. Yes, of course if you put in money from you paycheck every pay day your savings account will get larger but the bank helps you in a big way. The term you most understand is “compounded interest” When you put your money in the savings account it earns interest. The cool think about compounded interest is the bank pays you interest on the interest they gave you the month before. So while you deposit more money each month you savings grows as does the interest on the money the banks pays you for keeping your money with them.

 The importance of personal savings accounts, IRA and a stock portfolio that you build over the years is a must if you want to have a comfortable retirement.  This is something you will do on your own and you must start at an early age.

The uncertainty associated with Social Security and company pension plans means the responsibility of a comfortable retirement rests entirely on you.

The IRA Advantage- 

IRA stands for Individual retirement Account, and it’s basically a savings account with big tax savings account with big tax breaks, making it an ideal way to sock away cash for your retirement. A lot of people mistakenly think an IRA itself is an investment, but it’s just a basket in which you keep stocks, bonds, mutual funds.

Whether you have a 401(k) or other tax advatanged savings plan at work, consider investing in an IRA to augment your retirement savings plan.

With an IRA you do not have to pay taxes each year on the capital gains, dividens, and other distributions from your investments you have built in the IRA program.

Did you put a plan together for retirement?

• Open a savings account.
• Open an IRA.
• Set up direct deposit with you new employer for a portion of your check to go into savings.
• Speak to a financial advisor about a savings plan and retirement.

Salon owner and operators talk about the Good Bad and the Ugly:

Magnus Salon and Spa- Roswell GA: “My salon offers a 401k retirement plan. I encourage my employees to ask, get involved meet with the salons financial advisor and get started saving now. I have been in business over 20 years and I can’t believe how fast it went. We get old quick and retirement is right around the corner. My mom still cuts hair in my salon, she does love and it would kill her to stop but she does not have the financial independence to stop working and  retire.”