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Effective Steps to Retirement Planning

By Charles Hopkins Published 08/8/2006 | Social Issues
 

In this overtly competitive world, where we live under the constant pressure of outliving our capacities, rest and relaxation appear like ever illusive dreams that do not seem to happen to our lives. While life gets miserable under the grinding pressure of a corporate career, we long for that day when we will be liberated from this obligation of rushing to and fro from workplace to home. Yes, in this extreme competitive atmosphere of professional life, most of the Americans literally wait for their retirement days. While most of us wait eagerly for the retirement days, few of us spare thoughts on how can we make it truly wonderful. But in the absence of a well chalked out retirement planning, you will not be able to enjoy the relaxed living of which you have always dreamt of. On your retirement you are taking plunge into another inevitable phase of your life and without a systematic planning, the new phase may prove to be even more stressful than the pre-retirement days. So make an effective plan to start this new innings with energy and vigor. The article shows you how.

Take the examples of thousands of Americans, suffering from poverty in their old ages. Do you know why? Simply because they relied a lot on the Social Security as their sole means of retired life income. If you do not want to meet with the same end, then start early to plan for retirement and believe me, it is never too early to start the planning. The earlier you start saving for creating the fund for your retirement, the greater will be the wealth at your disposal at the time of your retirement. It sounds unbelievable, but it takes just simple mathematics to know that a person who starts saving as meager as 2000 per annum in his twenties and continue to do so till mid thirties, will be the owner of more wealth than a person who started to save only at his mid thirties, even though he continues to do so for over thirty years. So you can see yourself, the efficacy of starting an early retirement planning.

Present finance scenario is dominated by a number of investment and savings schemes. In spite of that, the traditional tool that is still regarded as the best retirement vehicle is your employer's 401(k) Plan. You get tremendous tax benefits through this tool and this reduction to your taxable income actually adds to your total savings. In this plan, your saving is added with the amount contributed by your employer. The employers contributions in many firms even exceed fifty percent of their employees contribution. Thus, participating in your employers 401(K) plan comes out as a wise decision many years after when you retire with a plentyful of cash.

The second retirement planning tool is the Individual Retirement Account, better known by its abbreviation, IRA. This plan also offers you tremendous tax benefit, in which pre-tax contributions are allowed to grow tax-deferred. Until you are not withdrawing the money, you do not have to pay taxes.  So for the entire stretch of time beginning from the first contribution, until the withdrawal, the amount which would have otherwise gone to pay taxes will continue to earn income. Till you reach the age of 59, you are entitled to enjoy this benefit.

Also fix a budget beforehand as it will help you in proper management of your retirement income. You had many financial obligations to meet in your pre-retirement days and a budget used to help you to attain these obligations. In your retired life also you have certain goals and the responsibility to hold funds to support you through your remaining years. If you stay in budget you will have enough for fulfilling your retirement goals as well as sailing through the expenses of your future old age cares. But remember, you must customize your retirement goals according to the size of your total retirement fund. 

With retirement, you have stepped into another juncture of your life-journey and it is up to you, how you can make the best out of it. You do not need to be a superman to get a happy and healthy retired life, only you have to churn out an effective plan to make all your retirement dreams come true.