Are You Prepared for Retirement?, 0317 COBJ, Vol. 46 No. 3 Pg. 81
| Author | Deborah O’Neil, J. |
Law Practice Management
Deborah O’Neil, J.
I am going to answer a question with a question: What day of the week do you spend more money-Wednesday or Saturday?[1] Many of us can answer this without much thought. It is almost always Saturday.
Consider
this: During retirement every day is a Saturday, with time to
play, enjoy, learn, and create new experiences. This applies
even to those of us who hope to continue working with a
reduced schedule; there is a lot more time to enjoy life,
which, depending on your activities, can require more cash
and resources. Unfortunately, fewer than half of all
investors have tried to calculate how much they’ll need
in retirement.
Assessing Your Needs
So, are you prepared for retirement? To be prepared, you likely would have:
• identified your monetary needs during retirement, including living expenses, projected healthcare costs, and any discretionary spending you would like to have;
• calculated what your current retirement accounts and savings are projected to grow to at the point of your retirement, using a reasonable growth rate based on your current asset allocation; and
• chosen a path to make up for any shortfall so you can retire the way you want to.
If you
are like many professionals, you are busy working and
building your business. Your plan is to start planning for
retirement tomorrow, next month, or next year. However, the
value of starting now cannot be minimized. The chart
below shows what happens when an individual saves $500 per
month in a tax-deferred retirement account for the periods
noted.
Scenario 1-10 years
Scenario 2-20 years
Scenario 3-30 years
(Image Omitted)
There is an often quoted statement by Albert Einstein that “[c]ompound interest is the eighth wonder of the world.” And that is the exact phenomenon that occurs in a retirement account that grows tax deferred for many years.
Getting Started
Saving for retirement doesn’t have to be complicated. To get started, find out whether your firm offers a retirement plan for employees and if you are eligible (some plans have a waiting period for new employees). If so, you should identify your budget and immediately start deferring funds to the account. The goal...
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