RETIREMENT PLANNING
"Information about money is more valuable than money."
Walter Wriston, Former CEO Citibank
Calculate how much you should be saving for retirement each year.
It is estimated
that approximately half of all US workers will retire by 60 years old, yet the
average worker doesn't start saving for retirement until they are in their late
thirties and even then the average savings rate is less than five percent of
gross income. The average retiree can expect to be retired for a period of 20-25
years. Retirement life
expectancy is expanding while work life expectancy is contracting. BUSER BROTHERS, INC.
helps you plan your retirement in several ways. Some are:
1. Capital needs projections at retirement.
2. Planning for investment and saving before retirement so that retirement goals are met.
3. Qualified Plans (Defined Benefit and Defined Contribution) and Non-Qualified Plans available to the client are analyzed and recommendations are given to improve performance.
4. Combining retirement planning with tax planning for maximum utilization of the tax deferred IRS code provisions.
Tax Code Summary for Retirement Contributions
Types of Retirement Plans:
Qualified Plans: They are "qualified" in that they must meet the ERISA ("Employee Retirement Income Security Act of 1974") requirements which include coverage, vesting, participation, reporting and fiduciary guidelines. If these requirements are followed both the employer and employee receive tax advantages.
Non-Qualified Plans: Non-qualified plans provide key employees deferred compensation which exceeds the qualified 415 plan limit and do not meet IRC Section 401 and ERISA requirements. As a consequence, they do not have to meet the nondiscrimination requirements of qualified plans.
| Qualified | Plans | Other Tax Advantaged Plans | Non-qualified Plans |
| Pension Plans | Profit Sharing Plans (Defined Contribution) | ||
| Defined Benefit Plans | Profit Sharing plans | Simplified Employee Pension (SEP) | Deferred Compensation Plans |
| Cash Balance Plans | Stock Bonus Plans | IRAs & Roth IRAs | Non-Qualified Stock Option Plans |
| Money Purchase Pension plans | ESOPs | 403(b)/TDA Non-Profit | Incentive Stock Option Plans |
| Target Benefit Plans | 401(k) Plans | SIMPLE IRA | Phantom Stock Plans |
| Keogh version of MPP, Target &Tandem | Thrift Plans | Keogh Profit Sharing | Split Dollar Insurance |
| 412(i) Plans | SIMPLE 401(k) | 457 Plans Government | |
| Age Based Profit Sharing Plans |
How Much Should You Save Each Year for Retirement?
Are you on the track to a comfortable retirement? The amount you should save each year depends on how far you are from retirement and how aggressively you invest.
Find out how much you need to save each year to accumulate a nest egg of the size you want by retirement age.
Use the table below to estimate your needed yearly savings amount. The steps below will show you how to use it.
| Years Until Retirement | Savings Multiplier | Growth Multiplier |
| 5 | 18.1% | 1.28 |
| 10 | 8.0% | 1.63 |
| 15 | 4.6% | 2.08 |
| 20 | 3.0% | 2.65 |
| 25 | 2.1% | 3.39 |
| 30 | 1.5% | 4.32 |
The table assumes an after-tax return of 5% per year — an extremely conservative assumption. If you are a more aggressive investor, you will need to save less.
Step One
Suppose you have determined that you need a lump sum of $375,000 to fund your desired annual retirement income. You are 40 years old, and want to retire at age 65.
To find out how much you must save each year to have that $375,000 nest egg by the time you’re 65, multiply $350,000 by the 25-year savings multiplier (2.1%). You will need to save $7,875 a year for 25 years (2.1% times $350,000 = $7,875).
If you are expecting a lump sum at retirement, subtract that amount from the nest egg amount.
Step Two
Now suppose you already have $75,000 in a 401(k) plan or IRA. To find out what that amount will grow to in 25 years, multiply it by the growth multiplier for 25 years (3.39). Your $75,000 will have grown to $254,250 by the time you retire (3.39 x $75,000 = $254,250). Subtract the $254,250 from $375,000. This amount ($120,750) is the amount you must accumulate by the age of 65. Multiply the $120,750 by the 25 year savings multiplier (2.1%), and you see that you must save $2,535.75 per year to accumulate the $120,750.
Monitoring Your Retirement
It’s important to look at your portfolio every year, since returns and inflation may not match your forecasts. Monitor your results to make sure you’re on target.
Catching Up
What if you have too little currently saved? To catch up, boost your annual savings rate. If you are 20 or more years from retirement, the boost need not be that high. Also you can increase your retirement nest egg by delaying retirement.