Tuesday, March 2, 2010

Retirement Planning (Continued)

Start saving early

 If you save 15% of your salary from the age of 25, only a third of the benefit you receive at retirement will come from your contributions. The rest will be from growth.

 The sooner you start saving the sooner you can earn interest on your savings and then earn interest (compound interest)

 Another way of looking at it is how much more you will have to save to get 90% of your salary at retirement

Starting age 25 35 45

Percentage of salary you need to save in order to achieve 90% income at retirement:
15% at the age of 25; 25% at the age of 35; 47% at the age of 45
Save your bonus
You can build up your retirement “bonus” by taking advantage of the tax free allowance and saving 15% of each bonus into a retirement vehicle.

Don’t cash out your savings before retirement

 A recent Alexander Forbes survey showed that people cash out their pensions 90% of the time when changing jobs and end up paying tax on their savings

 If you contribute 15% of your salary to retirement savings for 5 years, your pension will be equal to about one year’s salary.

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