Pam Etuglavu's Financial Advice

Plan for your retirement

No matter how young you are, it's never too early to begin planning for retirement. The earlier you start, the quicker you will reach your goal. Most people strive to retire without having to worry about day to day expenses, and they also want to take vacations that they put off until the kids were grown. Funding your goals is the foundation of your retirement plan, and formulating a strategy to reach those goals is an ongoing process. If you plan early enough, you could retire a millionaire, but most of us won't start early enough to accomplish that feat.

Set your goals. These will differ from one person to the next, and depending on your job or your needs, you might be able to retire at age 62. Your accessible retirement fund will rise as you get older; this holds true for pensions and Social Security alike. IRAs and 401k plans also offer extended benefits for those over 65.

If you plan to retire at age 65, you will need 60-90% of your current income in order to remain in your current lifestyle. Those that make less than the national average should aim to save more, and those that make more than that can get away with putting back less. Social Security only provides about forty percent of the average current income, so plan ahead. Use the AARP's calculator to compute your expenses, including medical costs, as well as daily expenses and insurance. You should also learn how your wages and taxes will affect your Social Security benefits, so you can decide when to retire.

You also need to figure out what assets you will still have after retirement. Things such as your home, your savings, investments and vehicles fall into this category; you should include a company pension or Social Security if applicable. Your home's equity is also a source of income, and you could potentially benefit from a reverse mortgage.

Assess your risk tolerance, which is the loss you can endure in exchange for a higher return. The older you are, the lower your tolerance. If you are set to retire within ten years, you will have a shorter time to correct your financial situation. Learn about the various investment products that commonly fund retirement plans, and estimate your returns by your retirement age.

There aren't many people that can retire on only their company pension or Social Security. Investing and saving are the difference between a comfortable retirement and a miserable one. Most people realize they aren't saving sufficiently, but don't know how or where to start. Aim to save at least ten percent of your income, increasing as you feel comfortable doing so. Look for ways to trim expenses, and use the money to start your retirement savings.