Believe it or not, a significant portion of the people in America seem to think that retirement is an entitlement that just drops into your lap. To gain a proper understanding of the matter it is useful to look at the concept of retirement in a very basic, stripped-down manner.
The word “retirement” describes the act of ending your working career. It doesn’t imply any automatic influx of income that allows you to do so in financial comfort. If you plan on retiring when you’re in your mid-60s, you’re going to have to pay your way for perhaps two decades or more. If you can do this without earning a paycheck, that’s fantastic and making sure that this is possible is what retirement planning is all about. But there are no guarantees.
Why do people get the idea that retirement is a given? Most of them feel as though Social Security will provide them with the income that they need to enjoy a comfortable retirement. Depending on your lifestyle and your expenses, this is probably a mistake. Last year the average monthly Social Security payout was all of $1,072. And of course the future of the program is in question due to the impetus toward reducing the federal budget deficit.
What can you do to become prepared for retirement? To devise a comprehensive plan for the future the wise course of action would be to arrange for a consultation with an experienced retirement planning attorney. But for starters, you would do well to participate in the 401(k) plan that is probably offered as part of your benefits package at work. These are retirement savings accounts that you contribute into with before-tax earnings, so in addition to building a nest egg you also gain a tax advantage. Plus, many employers will match your contribution into the account, and this is an excellent opportunity to pad your retirement savings without dipping into your own pocket.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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