Published March/April 2015

Is $1 Million Enough?

5 things standing between you and retirement

AAA offers products that can help you retire when you want to. While it might have been better to start saving early, there’s still time, even for late starters. To make sure you are on the right track, consider these five facts:
1. You’re never too old to save. A few years of serious saving can make a huge difference. As a rule of thumb, anyone under age 70.5 with earned income can make yearly contributions of up to $5,500 to an Individual Retirement Account (IRA), and if you’re over age 50, you can contribute an additional $1,000 yearly.
2. You’ll need more money than you think. A $1 million nest egg sounds like a lot, but spread over a 30-year retirement, it amounts to about $50,000 a year. Aim high in your saving. 
3. A pension won’t cover it all. Baby boomers will get less financial help from pensions than their parents did. According to the Employee Benefit Research Institute (EBRI), the average annual pension payout for those age 65 and older is around $10,900. Other types of investments that offer lifetime income streams, such as annuities, may be able to fill the gap. 
4. You may not be able to pick your retirement date. While about a quarter of employees aim to work until age 70, just 8 percent of current retirees managed to stay employed that long, according to EBRI. Health problems, layoffs, and the need to care for a family member typically drove their decision. It’s important to save early so you are prepared for the unknown. 
5. Personal savings, CDs, and annuities are key. Personal savings typically make up half of the income stream for retirees. Save now by opening an IRA and taking advantage of 401(k) contribution limits to put away the maximum amount. For additional savings options, some retirees consider a tax-deferred annuity, which works like an IRA without a tax deduction when putting money in, and there is no age or contribution limit. With CDs, many engage in a laddering strategy of spreading savings among a variety of CDs with different maturity dates and rates. 
Be sure to consult a financial planning professional to learn about the best investment strategies for you.
Deposit products offered through Discover Bank, Member FDIC.
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