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Saving for retirement can be started as early as 20s. It allows people to have almost 40 years to save for the retirement. Also, there is no need to put out a large amount of savings to build a retirement portfolio.
Just the savings of 3-5% of earnings will be enough for retirement portfolio. However, if the savings start after the age of 40, people have to take out 15-20% of the income for retirements savings. Apart from it, there are many other factors that affect the retirements savings. They can be explained as under:
Inflation:
The amount of savings that people want to save for retirement should factor the element of inflation. It is bound to rise in coming years, and the same amount that is sufficient for living today for a year might not be enough at retirement age. Therefore, the inflation factor should not be ignored.
Pension Plans:
Many a times people are not aware of their company’s pension plans. The company offers the benefits, but people fail to take advantage of it. It is, therefore, advisable to know whether they are covered with registered pension plans. Even if they are, what is the type of pension plan? Whether it is benefit plan or defined contribution plan? The company pension plan allows people with more flexibility to save for retirement on their own.
Government benefits:
The next factor affecting the retirement savings is government benefits. People should know what the government benefits applicable in their case are. Also, they should not forget that government benefits are taxable.
Retirement age:
Time is directly proportional to the savings. The longer you work, more you can save and vice versa. So, if you are planning to retire early, you have to put in more savings from the income for a healthy retirement portfolio.
Working during retirement:
Retirement at age of 60 years necessarily doesn’t mean that people cannot work part-time. If they do, they can support their pension with extra income.
The need/want to spend:
It is an important factor to determine retirement savings. It is better to have practical goals of retirement savings. In the case, it doesn’t match with the inflation and other discussed factors, the savings for retirement will fall short by a huge amount.
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