Planning for Retirement

Use Benefits Calculator to Get Retirement Ready
Retirement: How Much Do You Need to Save?
On Your Road to Retirement Glossary
Retirees Share Lessons Learned

Use Benefits Calculator to Get Retirement Ready

If you're looking to talk to somebody about saving or investing for retirement, People's Credit Union has partnered with True North Financial group to provide free financial services to our members. Visit their page today to find out how to schedule a no-cost, no-obligation meeting and learn more about your retirement saving options.

More than half of all Americans have not taken the time to complete a retirement-needs calculation—the first planning step to determine how much money they need to save for a comfortable retirement.

Social Security benefits are just one piece of retirement income, but determining your future benefits is an important planning step. The retirement estimator at ssa.gov can help. The estimator's calculations are tied directly to your actual Social Security earnings record so you don't have to manually enter data. It also provides a more accurate estimate of benefits than previous calculators, as well as improved speed and security. This can help you better plan for your retirement years and determine whether your savings are sufficient to maintain a suitable standard of living.

Once you've estimated your Social Security benefits, you will have a better idea of how much you will need in personal savings. These first steps can help you become retirement ready:

Track expenses and evaluate whether those expenses will continue in retirement.
Create a budget for your current situation.
Determine current net worth.
Get an estimate of pension or 401(k) or 403(b) income possibilities, and determine when you are eligible for retirement.
Determine whom you'll be providing for in retirement, and plan for long-term care for any dependents.
Calculate your life expectancy.
Set a retirement savings goal and make a plan to reach it.

Saving is even easier if you use direct deposit at People's Credit Union. With direct deposit, you skip the paper checks—your employer deposits the money directly to your savings account, allowing you quicker access to your funds. Direct deposit also eliminates the worry of misplaced or lost checks sent in the mail.

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Retirement: How Much Do You Need to Save?

If you're looking to talk to somebody about saving or investing for retirement, People's Credit Union has partnered with True North Financial group to provide free financial services to our members. Visit their page today to find out how to schedule a no-cost, no-obligation meeting and learn more about your retirement saving options.

Do you know how much you can expect from Social Security in retirement--or from any pension plan you have? Do you know how much you need to save to make up the shortfall in your desired retirement income?

Gather information about any traditional pension and other retirement plans you have. Request a benefit summary plan, including when and how you'll receive your payments. For an estimate of your future Social Security benefit, watch your mail for the annual statement now sent automatically to all workers age 25 and older.

Then estimate your retirement expenses. In general, you'll need about 70% to 80% of preretirement expenses. But these traditional formulas may leave you short--due to longer life expectancies, active retirement lifestyles, higher medical expenses, long-term-care costs, and higher property taxes.

If anything, overestimate for unexpected spending and factor in annual cost-of-living increases between now and the time you retire, as well as throughout retirement.

A financial adviser, retirement planning software, or Internet calculator can help you calculate how much you need to save to make up the shortfall in your desired retirement income. Remember that even the best advisers and software can provide only an estimate of your needs. Your results will change based on actual investment returns, inflation rates, tax law changes, changes in Social Security, and how long you live, among other things.

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On Your Road to Retirement Glossary

401(k)

Retirement savings plan funded by employee contributions and, often, by partially matching contributions from the employer. Most 401(k) contributions are made on a tax-deferred basis. Interest, dividends, and capital gains generally accumulate tax-free until withdrawn.

403(b)

Retirement savings plan generally offered by public schools, colleges, and universities, as well as charitable organizations that are tax-exempt under section 501(c)(3). Contributions are tax-deductible, growth is tax-deferred, and you can contribute more per year than you can with an IRA.

Annuity

A contract between a consumer and an insurance company. The consumer invests money with the insurance company in return for a stream of retirement income.

Beneficiary

Someone who benefits by receiving money from an insurance policy, will, or trust fund.

Catch-up Provisions

Allow people age 50 and older to save additional money in IRAs (individual retirement accounts) and 401(k)s.

Compound Interest

Interest calculated not only on the original principal that was saved, but also on the interest earned and left in the account.

Go Direct^®

A program offered by the U.S. Treasury and the Federal Reserve that encourages people to have their federal benefit checks directly deposited. Visit GoDirect.org or call 800-333-1795.

Individual Retirement Account (IRA)

A personal savings account that offers the potential for tax-advantaged growth of retirement savings. There are two types: Traditional and Roth. These IRAs have important differences with respect to income limits and tax benefits. See definitions for Roth IRA and Traditional IRA.

Money Market Account

A type of savings account that pays a higher rate of return (dividends) than a regular savings account, in return for higher minimum balances and check-writing restrictions.

Pension

A government-approved employee retirement plan offered and funded by the employer.

Roth 401(k)

An employer-sponsored investment savings account funded with after-tax money. The account grows tax-free and the withdrawals of earnings taken in retirement aren't subject to income tax if you're at least 59½ years old and have held the account at least five years. Unlike the Roth IRA, the Roth 401(k) has no income restrictions.

Roth IRA

Retirement savings vehicle where you make contributions on an after-tax basis, and earnings grow free of federal taxes. This means you don't get a tax deduction now, but you won't need to pay taxes on the earnings later. There are income limits for making a contribution (for 2009, up to $120,000 for single filers and up to $176,000 for joint filers). See irs.gov for more information.

Share Certificate/Certificate of Deposit (CD)

A credit union savings account that will earn dividends at a particular rate if held to maturity. If you withdraw any or all of the principal before maturity, you may have to pay a penalty of a percentage of the amount withdrawn.

Traditional IRA

Retirement savings vehicle where you may be able to deduct your contributions from your current taxes, and earnings grow tax-deferred until retirement. There are no income limits for making a contribution. See irs.gov for more information.

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Retirees Share Lessons Learned

Create a Network

Mary had to adjust to the loss of workplace relationships after she retired as a New York journalist to move to Florida.

"A lot of my friends were tied to work," Mary says. She created a social network by visiting a friendly coffee shop and joining a spiritual group.

Mary's retirement goals include learning how to make her money last into her 90s, since her mother lived to age 94. Now age 72, Mary works part-time as a freelance journalist to supplement her savings.

"Become very self-reliant," Mary says. "You have to look out for yourself and understand your money."

Do Some Soul-Searching

Olivia wishes she had worked longer before retiring at age 61 to take a "once in a lifetime" six-month boating trip with husband Douglas down the Mississippi River.

"I didn't plan long enough for having enough money set aside," says Olivia. "In hindsight, I should have worked a couple more years."

Olivia has taken several short-term, full-time assignments from her former employer to rebuild her finances. She questions her retirement choices as she worries about getting—and staying—out of debt.

"Do a little soul-searching about what you want," Olivia advises.

Adjust Your Expectations

Phil never expected to live to be almost 80 when severe diabetes forced him to retire at age 64 from farming in southern Wisconsin in 1992.

Phil and his wife Donna have gradually adjusted their lifestyle to their health needs by moving first to a house in a nearby town, then to a duplex, and finally to an apartment complex for seniors.

Phil tells others to save more than they expect to need.

"On a fixed income, money disappears in a hurry," Phil says. "Plan to live longer than you expected."

Plan Ahead
Jan planned extensively before her retirement from full-time work in 2001.

That helped Jan and her husband buy a house in an Arizona retirement community where they found opportunities to work and play.

"Before you buy, go visit the facility and really picture yourself living there," Jan advises. "Figure out what it will be like, day to day."

But Jan's optimistic plan failed to anticipate the impact of an economic downturn on her investments. While the couple is financially stable, Jan suggests including the "worst-case scenario" in any plan.

She also recommends a plan that extends from the active early years to the later sedentary stage.

"You've got to have goals," Jan says.

As you plan for your senior years, consult with professionals at People's Credit Union.

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