Retirement Planning: Never Too Soon To Start

With all the investment options out there such as stocks, bonds and mutual funds it can all be a bit confusing for people who are trying to plan for retirement. And then there are the banks that suggest putting your money in an account and leaving it there until retirement.

There are numerous reports that say there are more than 60 million Americans that have no money saved for retirement. If you plan on living off of Social Security you can only expect to receive $11,000 per year. When you consider all the expenses of living such as bills that need to be paid, food and gasoline this is not a large amount. And if you are renting an apartment there are even more expenses.

Knowing that Social Security will not be enough to survive on isn't even the worst news. Social Security may not be available by the time young professionals retire. And if you and your spouse are earning $90,000 per year by the time you are both 40 then you need at least $2 million in order to retire at the age of 65 and maintain the same lifestyle.

Planning ahead will allow you to meet this goal. There are some things that you can do to assure this.

1. You first need to determine the lifestyle you will lead when you retire. Are you going to do a lot of traveling where you will need more money or will you settle down and spend less money?

2. You need to understand that prices for everything will be inflated in 30 years. For example if you are paying $225 for electricity costs in 2007 you need to factor in inflation so you know how much you will be paying in 2037.

3. You need to take into account the expenses of having children. Even after they move out of the house you will need to probably spend money traveling to see them, especially if they live across the country.

4. At some point in time most people will need the care of a health professional. Nursing homes can be very expensive. At this nursing home care costs about $100 a day with the rates expected to increase by 4% a year. Also take into account that you may get an illness at a younger age which will affect not only your income but also your expenses.

The best way to do financial planning is to have two budgets. The first is for the money you will need until you retire, and the second is for the money you will need after you retire. Naturally these will change a little as time goes on. With careful planning you can be assured that you will have what you need to live a good life.