Retirement goals — Why bother saving?

Here’s the truth: if you’re relatively young and you’re already saving for your retirement, you’re an outlier. You’re also on your way to a more comfortable retirement. But if you’re anything like the rest of us, you’re probably wondering why you should bother saving for your retirement goals when there are so many other good things to spend the money on now. Won’t the future sort itself out? In a word, no.

Retirement considerations for saving:

• You may live quite a long time in retirement. Longer than you expect, in fact. If you’re one of the many people who underestimate how long you’ll live in retirement, you may find yourself running out of money.
• Some people find that their expenses decrease in retirement — their house is paid off and children have moved away. But many others find that their dreams for retirement come with big price tags. Depending on your retirement goals, you may need a minimum of 70 to 80 percent of your pre-retirement income.
• Social Security may not cover all your retirement expenses. According to the U.S. Census Bureau, today’s retiree gets less than half their income from Social Security. The rest of the income will need to come from other sources, like personal savings and pension plans.
• Inflation may take a bite out of your retirement savings. Remember your dollar may buy a lot less in the future than it does today.
• If your employer sponsors a retirement plan, you can take advantage of that now. Matching contributions and tax incentives make your employer-sponsored plan one of the smartest ways you can save.

Here are some great reasons to invest in your employer’s plan if available:

• Your plan offers a variety of investment options managed by experienced professionals.
• You can save automatically. Simply specify how much, and the amount will be automatically deducted from your paycheck and deposited to your plan account — before you ever see the funds.
• Your contributions reduce your current taxes. Because your contributions are made with pre-tax money, you reduce your overall taxable income, which adds up to considerable savings.

If you don’t have a workplace plan, or want to save more than your plan’s limits, consider opening an Individual Retirement Account (IRA). A Traditional IRA can give you an up-front tax deduction if you meet certain income qualifications, and a Roth IRA provides a source of tax-free income for qualified distributions in retirement. You can also think about cash value life insurance as a means to help protect your family’s financial future.

But don’t stop there — put the power of compounding on your side:

When you save in a retirement plan, you’re putting the power of tax-deferred compounding to work for you. Your money can grow faster because earnings that could have been taxed get reinvested and earn even more. In addition, if your budget permits additional savings, the power of compounding interest can yield considerable savings in after-tax choices such as savings accounts. Speak to a financial professional to learn more.