Introduction
People always say to themselves that the time has not yet come to save and enjoy life it is necessary at the moment. Having reached retirement age they understand that they were too careless. One of the main reasons for careless attitude to the pension savings is debt. A large number of Americans with great difficulty paying residential mortgages repay payments on credit cards. Some people in the US have at least one of these three types of debt retirement.
Today, tens of thousands of Americans living in the country, whose age has long passed for 90 years and they are still paying for the house, purchased on credit in 80 years. Another reason that Americans ignore retirement savings is the inability to save on ordinary expenses. The problem of financial security of his old age has become an urgent and sharp, even in such an economically powerful country like the United States. There is a misconception that the material needs of the pensioners are significantly reduced in comparison with the working period (Lusardi A., 2009, p.34). In reality, the standard of living, habits, hobbies, health, desire to travel, and other factors require a sufficiently high level of financial security.
Therefore, in this period a person must be prepared specifically. Retirement planning is a necessity, not desire. Thus, understanding what a retirement plan is, what retirement years in the US include and what options exist for funding pension life, it is possible to ensure a decent and secure future long until retirement.
Body
Every employee must constantly monitor his or her economic situation and make the necessary adjustments to own retirement plan. The practice has shown that less than half of workers have pension plans created by the owners of the business or individual savings account (IRA).
It is important to remember that the Social Security system covers not more than 40% of the average working wage payments before retirement (Brown J. R., 2007, p.12). It is possible to assume that for a comfortable life should have retired from various sources at least 75-80% of previously received cash per month. This requires that the financial framework (retirement income) retired consisted of three parts: Social Security, Pensions, and Savings.
They are often called the three - legged stool at economic security. When to retire is one of the most difficult and painful issues as this decision affect a large number of factors that differ for each individual. Retirement age (full pension) in the United States begins with 66-67 years of age (for people born in 1938 or later). At the same time, any American has the legal right to complete his or her work and to start receiving a pension (Social Security Benefits) starting with 62 years (Brown J. R., 2007, p.8). However, it will be a partial pension, which will be up to 80% of the total.
However, a part of today’s Americans prefers not to wait until the due date, and draw a pension before. Some experts suggest retiring in 70 years. This will allow pensioners receive SSB on 30% more than the normal pension. However, taking such a decision, it is necessary to take into account two factors: the first is to calculate how much money people will lose if they do not receive the normal retirement 3-4 years (70 - 66 or 67); the second is the number of years a person will need to live after 70 years, to offset these losses, obtaining increased pension and how many years people will be able to receive it. At the moment I am inclined to think that at age 62 to start getting a normal pension and at the same time to collect savings.
SSB method of calculating the size of working Americans is based on the work experience (number of years worked), received salary and annual deductions in the federal pension system (Ellis C.D., Munnell A.H., and Eschtruth A.D., 2014, p.7). On average, the SSB country is about 1100-1300 dollars a month. However, for a comfortable life in modern conditions with a high level of consumption that is not enough. An essential part of the pension savings is Americans of their savings in pension funds.
The company usually opens a special account for each working person. The monthly contribution of a worker and an employer is due to the agreement between them (“What You Should Know about Your Retirement?”, 2013, p.14). In order to secure the financial health of the pension period, I plan to invest in the pension plan the maximum permitted amount. It should be remembered that the law allows to list in this plan does not pay more than 15% annually.
The agreement also sets out the conditions under which the employee takes ownership of assets deposited in his account of the owner of the business. Typically, as the main criterion appears the number of years of waste in a particular business. The agreement may provide for a one-off or gradual entry into the possession of the employer listed.
In the case of dismissal or transfer to another organization to work the employee is entitled to receive the sum due and (in order to avoid payment of taxes) for 60 days, he is obliged to transfer it to another pension plan. The money accumulated in the account of the pension plan are transferred for storage and management of banks, insurance companies or special funds, which is a contract. It specifies the conditions for the return of the amount paid based on earned income. I'm going to use this knowledge in the event of a change of employment.
In addition to pension plans, which provide business owners who work have the right to open individual pension plans Individual Retirement Account (IRA) (“What You Should Know about Your Retirement?”, 2013, p.5). They should be in second place after the pension plans offered by the employer. This is especially important for those who have no pension plan at work.
IRA plans are of two types: ordinary IRA and Roth IRA. They are limited to the amount of the annual fee and the procedure of taxation at withdrawal amounts from these accounts. In particular, Roth IRA plan exempt from taxes accrued in the account means the period of receipt, as their taxes have been paid prior to receipt of the money on the account. IRA is used for long-term savings that will ensure the income after retirement. In theory, I can divide the account into parts and each part to invest in different investment objects such as mutual funds or stocks of individual companies. In the future, I plan to discuss favorable investment options with an expert financial planner. For example, most employers offer their employees retirement savings plans. These savings plans can be used simultaneously with the opening of a personal retirement account Roth IRA.
Operating savings plans, also known as 401k accounts or 401a, are similar to a traditional IRA (“What You Should Know about Your Retirement?”, 2013, p.3). They can also be used for investment, the type of which is determined by the workers at will. In most cases, there are no restrictions on the amount of funds contributed to 401k annually. The employer carries out the automatic transfer of funds on this account, keeping them out of a person’s paycheck each month. These amounts are not taxed as long as a person does not start to remove them from the account. As the money comes through automatically, the process of pension accumulation is practical and reliable. Some employers added a certain amount for each of pension contributions due to the company.
Owners of personal retirement accounts are tax-free (Ellis C.D., Munnell A.H., and Eschtruth A.D., 2014, p.73). Traditional IRA accounts allow not paying taxes on accumulated capital as long as you do not start to take the money after retirement. There are also retirement accounts, called Roth IRA. In the case of opening such an account, I will just pay taxes on income received from the investment, but I will not have to pay tax when I withdraw funds from the account at retirement.
Country limits the amount of money that can be invested in IRA each year (Lusardi A., 2009, p.185). Also, an important area of accumulation of funds for retirement period is to invest: real estate, antiques, stocks, bonds, lottery, and I look forward to eventually getting enough money to invest.
In addition, more than one million US citizens between the ages of 50 years, considering the possibility to spend old age in cheaper states or abroad. This trend has accelerated with the onset of the economic crisis in 2008. Unfortunately, many Americans realized that they could not live comfortably on a pension earned in the United States, where food, rent, goods, and services are constantly increasing in price.
However, for many pensioners, who have serious health problems, relocation to other countries of concern due to the fact that they do not accept American medical insurance, e.g. Medicare (Ellis C.D., Munnell A.H., and Eschtruth A.D., 2014, p.21). However, I think it is more reasonable to plan retirement plan than to leave their country in the retirement age.
In the future, I plan to collect 10% of my income every year in the first few years after I stop working. Also, it is imperative to take into account inflation. Before you invest in something, I plan to accumulate funds for 6-12 months of normal life in the event of job loss or unexpected circumstances. If, after retirement, I decide to do a small business, I will consider that more than half of such companies usually break up in the early years because of the lack of a full-fledged business plan. Therefore, I will dispose of my finances wisely, so as not to deprive myself of a decent pension.
Conclusion
Retirement experts strongly recommend that all working people aged 18 and over, scrutinize them available pension plans, and possibly increase the standard payment. Life flies by very quickly and the task of each person is to turn the last decades of his life in her pleasure. In order to be able to live a more comfortable before and after retirement and that I was able not to work longer than planned, I am going to start to accumulate as soon as possible. Thus, I hope that my future employer offers retirement savings plan, which I use because it can bring me a big favor and stability in old age.
Planning for retirement is one of the largest investments that people make throughout their lives. In order to retire at a certain age and to create conditions for a comfortable life, one must develop a savings plan, and strictly abide by it. The earlier a person begins to accumulate, the better for him when retirement age comes. Usually, the pension is far from the thoughts of students and young people, so it should start to think when people are young and start their careers. However, the ideal time to plan and save money for retirement is the beginning of a career. Thus, the sooner I start planning my finances and money savings opportunities for retirement, the better future awaits me.
References
“What You Should Know about Your Retirement?” (2013). U.S. Department of Labor, Employee Benefits Security Administration (EBSA). Retrieved from
Brown, J. R. (2007). Rational and Behavioral Perspectives on the Role of Annuities in Retirement Planning. NBER Working Paper Series, National Bureau of Economic Research.
https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource- center/publications/what-you-should-know-about-your-retirement-plan.pdf
Lusardi, A. (2009). Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs. University of Chicago Press. Ellis, C.D., Munnell, A.H., and Eschtruth, A.D. (2014). Falling Short: The Coming Retirement Crisis and What to Do About It. Oxford University Press.
