Download RETIREMENT FACT SHEET.qxp

X
IT’S NEVER TOO EARLY TO START SAVING
Plan for your retirement
It wasn’t too long ago that most people could rely on Social
Security and their employer’s pension plan to provide most of
their retirement income. But times have changed, and it’s
becoming increasingly important for individuals to take responsibility for their own retirements.
THE REASONS:
1. People are living longer and retiring earlier.
2. Inflation takes a toll
Inflation has a dramatic effect on the future buying power of your
dollars. The table below illustrates how inflation increases the
costs of certain consumer goods, which means you’ll have to save
more just to keep pace.
Inflation Affects Your Buying Power
2. Inflation takes a toll.
1981
3. Social Security will likely not provide all the income
you’ll need.
1. People are living longer and
retiring earlier
Healthier lifestyles and medical advances have combined to
lengthen life spans. That means you’ll have to save more for
retirement because your savings may have to last longer. The
chart below illustrates the number of people living past age 65
and 85 in 2002 compared to projections for 2030. As you can
see, current estimates suggest that in the year 2030, 99% more
people will be living past age 65, and 96% more people will be
living past age 85.
A second trend stretching individuals’ nest eggs is early retirement. A generation ago, most Americans worked to age 65 or
beyond. Today, many American workers retire in their early 60s,
which means they spend more time in retirement, leaving them
less time to save for it.
2001
2021
Housing1
$ 68,900
$ 174,100
$ 285,840
Automobile2
$
$
$
College3
$ 35,530
8,912
19,653
$ 120,006
32,267
$338,363
3. Social security will likely not provide all
the income you’ll need
Experts estimate that you’ll need about 75% of your pre-retirement income to maintain a comfortable lifestyle. Today, Social
Security benefits provide far less than that amount, and may offer
future generations even less. On top of that, the relative number
of Social Security contributors is shrinking. In 1945, 42 workers
supported each retiree. However, in 2000, that number shrank to
three workers. By 2030, it’s estimated that there may be only two
workers for every retired person. 4
2002
30K
2030
70,319
60K
35,305
8,931
4,559
U.S. Resident Living
Past Age 65
U.S. Resident Living
Past Age 85
Investment & Insurance Products:
Not Insured by FDIC or any Federal Government Agency
May Lose Value
Not a Deposit of or Guaranteed by a Bank or any Bank Affiliate
People’s Financial Advisors is a division of People’s Securities, Inc., a
Broker/Dealer, Member of FINRA and SIPC, and a Registered
Investment Advisor. Investment and insurance products are offered
through People’s Securities, Inc., a subsidiary of People’s United Bank.
1
Source for housing costs: U.S. Department of Commerce, Bureau of
the Census. Cost of a new one-family house is measured by median
sales price. Predicted cost based on the average annual inflation
rate of 2.51% for the past 10 years (Standard & Poor’s Micropal,
12/31/01).
2
Source for automobile costs: U.S. Department of Commerce,
Economic and Statistics Administration. Predicted cost based on the
average annual inflation rate of 2.51% for the past 10 years
(Standard & Poor’s Micropal, 12/31/01).
Source for college tuition costs: U.S. Department of Education.
College costs assume four years at a private university, beginning in
the year noted, and include tuition and fees, room and board.
Predicted college costs based on the average annual increase of
5.32% for the past 10 years (Standard & Poor’s Micropal,
12/31/01).
3
FS-026 11/07 (1 of 2)
X
“NOW” IS THE OPERATIVE WORD
“NOW“ IS THE OPERATIVE WORD
GETTING ADVICE IS EASY
The earlier you start saving for retirement, the better, because
year after year the money you invest may earn interest, dividends and capital gains. If you reinvest those earnings in a taxqualified retirement account, they’ll generate additional earnings — a process known as tax-deferred compounding.
If you would like to schedule an appointment with one of our
Financial Advisors call us at 1-800-392-3009. This is the first step
in determining where you stand against your goals.
For example, the chart below illustrates how Mary began saving
$3,0005 each year beginning at age 25 and stopped saving after
contributing $30,000 over 10 years. John began saving for retirement at age 35 and continued to invest $3,000 every year for the
next 30 years. The tax-deferred accounts of both investors
earned 8% annually. Even though John contributed three times
more than Mary, at age 65 her account will be worth 62% more.
THE DIFFERENCE SAVING EARLIER
CAN MAKE6
Putting off a savings program by just 10 years can make a
big difference. However, it’s never too late to begin planning for
your financial future.
Source: 2001 OASDI Trustees Report. Social Security Administration,
Office of the Actuary, October 2001
4
60K
Based on provisions of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (“Act”), the annual contribution limit for
Traditional and Roth IRAs will gradually increase each year through
2010. Through the provision of the Act expire on 12/31/10, our projections assume that Congress will extend the contribution limitation provision of the Act beyond that date.
5
$535,434
40K
$331,462
This example is for illustrative purposes only and does not represent the
performance of any fund. The table assumes an 8% fixed rate of
return compounded monthly , and no fluctuation of principal. Dividends
paid by funds are not fixed, and the value of most funds varies with
market conditions. Distributions of deductible contributions and all earnings are taxed as ordinary income for the year in which money is withdrawn. Withdrawals received prior to age 59 — may be subject to a
10% federal tax penalty.
6
20K
JOHN
MARY
$90,000 total
$30,000 total
CONTRIBUTION
CONTRIBUTION
FS-026 11/07 (2 of 2)