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Thursday, September 29, 2011

Granada Hills Tax Professional Reviews Generation X, Y and Retirement

I recently read a great article about the need for the young generation (Generation X and Y) to save more money for retirement than their parents and grandparents generation.

As a father to a generation Y-er and uncle to generation x-er’s I know all too well how important it is to education these people on how to prepare for the future, even when retirement seems very far away.

The statistics in the article are sobering. “Fewer young people have access to generous retirement benefits, including traditional pensions and retiree health insurance. And anyone born in 1960 or later must wait an extra year, until age 67, to claim the full amount of Social Security they are entitled to”.

The article advises, and I agree, that members of generation X and Y should aim to save at least, if not more, than $2 million by retirement age. This of course includes social security and other pension benefits however every individual must calculate what those sums will be and make up for the difference in weekly, monthly and yearly personal savings (through IRA’s, personal savings accounts, etc).

Some tips to help reach retirement savings goals:
- Check with your employer about IRA matching. You can take some of the burden off yourself if your employer matches IRA contributions, lowering your monthly and yearly savings goals out of pocket.
- Set up a Roth IRA or 401K. The great thing about these accounts is your money can grow without paying taxes on the account balance. In most cases, if you wait to take out this money until age 59 ½ you won’t pay taxes on the growth. So start early!
- Do your best to get the most out of social security. Collecting too early will lower the monthly amount you receive, but waiting a few years can increase your monthly check.
- 65 is no longer “retirement” age. You have a long life expectancy! Plan to work longer and you will not only grow your retirement and set yourself up for an easier and more comfortable retirement, you will also maximize your payouts from social security, pensions, etc the longer you wait to retire.

The most important piece of advice is to sit down and really look at your budget sooner rather than later. Come up with a retirement plan, make long term decisions like paying off your mortgage before retirement to minimize retirement expenses, downsizing, etc. Envisioning the life you want after retirement will help put into perspective the money you need to save NOW in order to guarantee the lifestyle you want. It takes some work but once you understand how much you need to be saving each month you can set aside that money NOW and continue the habit until you retire. This will reduce tons of stress and worry from your life and you will be thankful when you are ready to retire that you have provided for yourself. (Same goes for planning college tuition for your kids! But that’s another post for another time).

Make an appointment and come discuss your retirement plans with me, Granada Hills Tax Accountant. We can set up a budget together, get advice on the right kind of retirement accounts for you and much more. And check out this great article on yahoo finance - http://finance.yahoo.com/retirement/article/113507/generation-y-2-million-dollar-retirement-usnews?mod=oneclick

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