Mitzie Ginsburg Online
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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