How To Secure A Comfortable Retirement

by Thomas J. Welsh

Everyone has retirement dreams. Some want to travel the world and experience different cultures. Others simply want to have the freedom to do what they want -- when they want to do it. Still others would like to use their leisure years to enjoy a hobby.

Whatever your dreams, you'll need a plan to help get you there. Just consider the facts: Although you will have lower expenses during your golden years, you will still need roughly three-quarters of your pre-retirement income to maintain your lifestyle in retirement.

Social Security can only provide limited support. The maximum benefit for a 65-year-old individual retiring in 1996 is about $14,000 annually, according to the Social Security Administration. Worse yet, the fate of the Social Security system is questionable, given the number of people who will depend on it in the years ahead.

For example, in 1995, baby boomers began turning 50 years of age. By the middle of the next decade, about 77 million Americans will be over that age. What's more, Americans are living longer, meaning more people will rely on Social Security benefits for a longer period of time than did prior generations.

You may be fortunate enough to have a solid pension plan waiting for you when you retire, but even an excellent plan may only provide you with about half the amount needed to maintain your standard of living in retirement.

Even if you have the best pension plan, there's another question you must seriously consider, regardless of your current job status: In these days of corporate restructuring and downsizing, are you sure you won't become an employment casualty before your leisure years begin?

To give yourself the best chance of securing a comfortable retirement, you need to start investing now, and put as much away as you can regularly. Even if you've never established an investment plan independent of your employer's program, it's never too late to begin.

For example, if you invest just $200 monthly in an account that earns a hypothetical rate of nine percent annually, your money would grow to $15,254 in five years, $38,417 in 10 years and $128,891 in 20 years. Add another $200 per month, and your nest egg would grow to $256,662 in two decades, assuming the same interest rate. (This hypothetical illustration is used to demonstrate the power of compounding interest and is not meant to be indicative of the actual performance of any specific investment).

When you consider inflation's impact on your money, you'll need every penny. In the last 20 years, the price of a loaf of bread has gone from 20 cents to over a dollar; a postage stamp that cost eight cents goes for 32 cents today. Even a Buick that cost $2,000 back then goes for more than $16,000 now.

No one can say what these items will cost when you retire, but chances are they'll be a lot more than they are now. By sitting down with your financial advisor, you can chart a course of action to get the most out of your money -- and work toward securing your retirement dreams.