Investing for the Long Term
Many financial experts believe that most people will need 70% to 80% of their pre-retirement income to maintain a comfortable retirement lifestyle, yet Social Security and pension plans are expected to fund just half that amount.
1 Making up the difference is a task that is left up to you.
How much you need to save depends on a number of factors, such as the amount of time you have for your investments to grow, the degree of volatility you are willing to accept, and how much income you expect in each year of retirement.
Consider the following:
- Both the number of active participants in traditional pension plans as well as the number of plans has dropped sharply over the years.2 In addition, many defined-benefit plans offered by private companies are underfunded, meaning they don't have enough assets to pay promised benefits.3
- Social Security benefits are intended to supplement other sources of retirement income. Furthermore, the future of the Social Security system is uncertain. Your assets may well constitute the majority of what you have to live off during retirement.
- The average life expectancy for Americans has reached an all-time high—77.9 years in 2007.4 With life spans on the rise, you may be retired for many years. Naturally, you’ll want your retirement savings to last throughout your entire lifetime.
- The sooner you begin a retirement savings program, the better. When it comes to investing, the power of time can have a significant impact on your success. By participating in a tax-advantaged employer-sponsored retirement plan and contributing to an IRA/Roth IRA (if eligible), you have the potential to build a sizeable nest egg over time.