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A comfortable retirement is a goal that many strive for over the course of their working lives.

Retiremet savings should begin as early as possible. [©Jupiter Images, 2010]
©Jupiter Images, 2010
Retiremet savings should begin as early as possible.


The University of Florida notes that there has long been a three-legged stool approach to retirement planning. The first leg is Social Security, which accounts for an average 40 percent of retirement income. An employer pension supplies 14 percent, while personal savings cover the remaining 46 percent.

These days, however, employers offer fewer and fewer retirement benefits, and many doubt the continued solvency of Social Security. Even if a worker can count on these sources, 46 percent is a hefty chunk of retirement income to cover. Therefore, taking charge of retirement savings and investments is a must for those who plan to stop working and don't have a disposable income. Getting started is not as difficult as many think. Though some details are best left to a professional, the basics apply to just about everyone.

Figuring Out Retirement Income

Calculate how much money is needed to retire. The AARP has a calculator that gives workers a figure based on current income, retirement age and life expectancy. The organization also has a series of videos on retirement planning, including How Big a Nest Egg, in which experts discuss how much individuals should plan to save.

The U.S. Department of Labor notes that most people have little idea what all their assets are worth totaled up. To get started, individuals should figure out how much his or her house is worth, how much money is in savings and bonds, and the value of other assets, including fine jewelry. However, when figuring current assets, pensions and Social Security benefits are not counted, but employer-backed savings plans, including 401(k)s, are including.

Total up how much money will be coming in the future. Money from the sale of a practice or business goes in this column, as does a likely inheritance. The U.S. Department of Labor offers a worksheet that helps add up pension, Social Security and Medicare benefits.

Plan to fill in the gap should combined current and future assets come up short of projected retirement goals. A majority of the American workforce will fall into this category and there are two ways to increase a nest egg: save more and work longer.

Decide when to retire. The longer an individual works, the longer he or she can keep growing personal savings and delay dipping into them. If medical benefits are received, employers will continue to pay into them as long as the individual is working. Social Security Online has some tips on how working affects an individual's benefits.

A Retirement Savings Plan

Save as much money as possible in a tax-sheltered account like a 401(k). There are several benefits: usually the money is automatically deducted from a paycheck, an employer may match contributions and fewer taxes will be paid on this type of savings. Some plans include catch-up contribution provisions that allow you to save a greater percentage of your income to a 401(k) account once you reach 50.

Open a traditional or Roth individual retirement account (IRA). There are benefits to each, depending on your tax situation. According to the Internal Revenue Service (IRS), contributions made to a traditional IRA are tax-deductible, and the account funds, including interest, are taxed after they are distributed. On the other hand, the IRS reports that Roth IRA contributions are not tax deductible but qualifying distributions are tax-free; a Roth IRA allows you to avoid paying taxes on any interest the account accrues. You can save up to $4,000 a year in an IRA or Roth IRA.

Come up with an asset allocation plan that meets your financial goals. There are three types of assets: cash or liquid funds kept safe in a bank account; bonds, which earn a conservative rate of interest; and stocks, which grow in a portfolio. The balance chosen will depend very much on how much risk an individual is comfortable with and how close he or she is to retirement. Check out the Financial Industry Regulatory Authority outlines asset allocation strategies that meet various goals.

Advice on Retirement

Talking to an insurance agent to make sure an individual and his or her spouse covered in the event of an early death or incapacitating illness. Planning for retirement assumes the best; working hard to enjoy the retirement years. But if an individual is forced to stop working due to a medical condition, he or she will need to have enough money to pay for care. Should a death occur, life insurance benefits can offset the spouse's retirement savings.

Check in with a financial planner periodically to adjust the retirement savings plan. Making a plan early is essential, but life circumstances change. As the individuals grow older, they will want to rebalance the asset allocation plan. It is also likely that individuals will have a different goal for retirement as the time draws closer.

For those who are just starting a career, the best thing he or she can do is start saving as soon as possible. Left untouched, small investments can add up to big savings over the long haul. Those who start young have time and compound interest on their side. Saving even $50 each month over 30 years will yield an extra $75,000 for retirement, assuming the money earns a return of eight percent. With the right plan, retirement can be a little easier.

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