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The Desire To Retire Essay

1526 words - 7 pages

Barry Cameron
UIN # 00728497
FIN 317 Mon 4:20

Everybody looks forward to the day that they no longer have to fight traffic or deal with an unappreciative boss. A time when one can focus on more meaningful things in one’s life. Spending more time with family, traveling, hobbies, volunteer work, becoming more active in the community or church; or “do nothing” as forty percent of Americans plan to do upon retiring from the work force. Without the promise of retirement, many would find it very difficult to get out of bed and head to work each morning.
“Retirement is a fairly recent phenomenon. At the beginning of the ...view middle of the document...

Then you factor in your own optimism or pessimism about the future to correct for the changes you foresee. Saving for retirement involves a long-term effort to accumulate a nest egg big enough to support you during your years in retirement. The goal of retirement planning is to determine how big the nest egg needs to be to support you comfortably.
When people think of retirement they think of social security. Social security is a government program passed by Congress in 1935 that helps workers and retired workers and their families achieve a degree of economic security. The program provides cash payments to help replace income lost as a result of retirement, unemployment, disability, or death.
“One of the earliest reported applicants for benefits was a retired Cleveland motorman named Ernest Ackerman, who retired one day after the social security program began. During his one day of participation in the program, a nickel was withheld from Mr. Ackerman’s pay for social security, and, upon retiring he received a lump – sum payment of 17 cents” (Social Security : A Brief History, 27).
Today Social Security is paid to retired workers on a monthly basis. According to the Social Security Administration’s website a 65 year old worker who was making $70,000 / year at the time of retirement should expect about $1600 / month with a $3,000 / month maximum family benefit amount (Benefit Calculators).
Unfortunately with the increasing number of people (baby boomers) entering the age of 65, the funding set aside will soon become inadequate. In 1950 there were 16 workers for each beneficiary. Today that ratio is closer to 3:1 and the ratio will continue to fall as people live longer and birth rates stay low. While today’s retirees and people nearing retirement can count on Social Security, it is possible that younger workers will not have a Social Security check to look forward to when they get ready to retire. A successful retirement plan should take into account the fact that future benefits will very likely be reduced and therefore treat Social Security as a bonus, rather than a given, and plan as if Social Security will not be there when it comes time to collect.
There are many ways to finance your retirement and one of them is a 401k plan. “A 401k is a qualified plan established by employers to which eligible employees may make salary-deferral (salary-reduction) contributions on a post- and/or pre-tax basis. Employers may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis” (401,K). Providing workers with a secondary type financing for retirement is sometimes crucial as a benefit for working for a particular business.
Another type of funding for retirement is a pension. A pension is a type of retirement plan, usually tax...

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