Investing In Yourself

Retirement, regardless of your age, is always closer than it seems and smart planning at every age is critical. In the 1970's, Americans saved nearly 9.5% of their income for retirement. Today, the figure has dropped to a mere 1.4% despite the dramatic increases to annual incomes. With the alarming savings decrease, Americans have to work harder and smarter at saving for retirement.

Save for retirement. In 2005, it is estimated that Americans need at least 70-80% of their pre-retirement income, adjusted for inflation, yet this is typically more than adequate and therefore not the answer for everyone. So how much do you need? Begin by getting a handle on what your retirement will cost - where you will live, what your expenses will be, is your home paid off, do you have any large debt, do you want to travel, and what will medical expenses cost? While those aren't the only questions, they are some of the most common. Establish a budget worksheet. Your income need can be determined based on an evaluation of your incoming cash flow (pension/retirement funds, 401Ks/ IRAs, Stock dividends/Investment Income, Social Security) balanced against your monthly expenses. Retirement calculators are also a great tool to assist in future planning and are available at San Diego County Credit Union's website.

Don't count on Social Security alone. We continue to experience economic shortfalls prompting the Federal Reserve and others in recent years to call for benefit reductions. Today, there is no alarm, however, don't count on social security as a fail safe. This year, partial benefits begin at age 62, while full benefits - at a maximum of $23,268 per person, per year, adjusted annually for inflation - are available to those at or above age 65 ½ . Each year after that, your benefit increases by up to 8% until age 70. You can request a Social Security estimate via the Social Security Administration's website.

Maximize your investments. Invest in a savings portfolio that is diversified. Young retirees need a combination of stocks, bonds and a small cash-based emergency fund typically allocated as 60% stocks and 40% bonds. From there, adjust the distribution to reflect the economic outlook, risk tolerance, estate-planning goals and overall health, among other things. Diversify. With equities, that means holding a mixture of mutual funds made up of large- and small-cap stocks, international stocks and real-estate investment trusts. As for bonds, investors with larger portfolios should consider laddering, staggering investments from short-term to long-term to reduce the interest-rate risk.

Regardless of your age, set a retirement goal and stick to it. By designing a customized savings plan to your personal savings needs, you'll get a jump start on living the good life. For more information, talk to the experts at San Diego County Credit Union for options to help you plan for the future.