A Background on Retirement Savings

Today most people know that they’ll need to supplement their Social Security and/or company pension benefits with personal retirement savings.  Just how important or how big a role personal retirement savings will play for you will depend on your unique financial situation.

  • The retirement age for social security benefits is slowly rising to age 67
  • Early retirement results in a permanent reduction in the Social Security retirement benefit
  • According to the Social Security Administration the average monthly Social Security benefit for all retired workers in 2005 was $955

The longer you wait, the less you’ll have!
The following chart shows the importance of beginning your retirement savings at an early age.
Assuming an annual rate of return of 10%, an individual who begins saving $100 per month at the age of 20 will have retirement savings of almost $900,000 at age 65 as compared to retirement savings of less than $100,000 if the individual begins saving for retirement at age 45. Please understand that the assumed rate of return of 10% is only for illustrative purposes and, of course, there is no guarantee of what rate of return your savings will realize.

Saving $100 per month and Assuming a 10% rate of return


The Importance of Compound Interest

Delaying retirement savings can keep you from realizing your retirement dreams because the power of compound interest only works when it has time. A quick estimator is to use the mathematical “rule of 72″, where you divide the interest rate you receive on an investment into the number of 72, and the result is the number of years it will take for your money to double.

“The eight wonder of the world is compound interest.” – Albert Einstein