Take control of your future The time is now
1 Participating in your employer-sponsored retirement plan is one of the best ways to 3 save for your future. And the time to save more is now.
No doubt, you have a lot going on. So it s understandable if saving more for retirement isn t on your mind right now. But here s why it probably should be. Retirement can be expensive. And to afford the lifestyle you want, you need a plan. The good news is that saving for retirement doesn t have to be complicated. The key is to determine how much you ll need and then make sure you re saving enough. Saving more now could mean the difference between reaching your savings goal and falling short. How much will my retirement cost? Such a straightforward question. Unfortunately, determining how much money you ll need in retirement isn t an exact science. However, many experts suggest you ll need 75% to 85% of your current annual income to live comfortably. To get a rough idea of how much you ll spend, take your current income and multiply it by 85% (0.85). Then multiply that number by 20 years. Why save more in my plan? Whether you are 5 years away from retirement or 40, saving in your employer s plan is a smart idea. Think about some of the benefits the plan offers: Saving in the plan is a piece of cake. Some of your pay automatically goes into your plan account every payday. Your automatic contributions to the plan can be made pre-tax, so your money can start working for you before the government taxes it. Plus, money in your plan account can continue to grow tax-free until you withdraw it in retirement.* *When taking withdrawals from a tax-deferred plan before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax. Of course, you won t know how long you ll live in retirement, but 20 years is a good starting point. Nailing down an exact dollar amount to save for retirement can be difficult, but there s no question that retirement can come with a hefty price tag. That s why it s important to save as much as you can now. 3
Christina Age: 23 I m young. I want to enjoy life. Saving more for retirement just isn t a priority for me right now. Celebrate graduation Land first full-time job Start saving for my retirement Adopt a cocker spaniel Get married Move into my first home Begin repaying my student loans Rent and furnish an apartment Welcome a new baby Buy a family car Celebrate graduation Land first full-time job Start saving for my retirement Adopt a Cocker Spaniel Get married Move into my first home Sign up for yoga class Increase my retirement contributions Visit Yosemite National Park 4 Begin repaying my student loans Rent and furnish an apartment Welcome a new baby Buy a family car Open a college savings account Take a beach vacation Continue my education
The time is now to take advantage of compounding The power of compounding When you ve just landed your first job, saving for retirement is probably the last thing on your mind. So why start saving now? In one word: compounding. Compounding refers to the snowball effect that happens when your investment earnings have the chance to generate even more earnings. These earnings can generate more earnings and so on. The results of compounding can be dramatic over long time periods, and this can really help grow your nest egg.* Still not convinced? Take a look at the chart to the right. Investment earnings Amount saved $44,143 20 Years saving $94,870 The benefit of saving early When you re young, it s easy to fall into an it can wait until later mind-set about saving for retirement. But if you can boost your savings now, you ll give your money plenty of time to grow and you can avoid worrying at the end of your career because you haven t saved enough. *All investing is subject to risk, including the possible loss of the money you invest. Note: Example assumes saving $100 per month, a 6% rate of return, and a beginning balance of $0. The rate is not guaranteed. This hypothetical illustration does not represent the return on any particular investment. The final account balance does not reflect any taxes or penalties that may be due upon distribution. Withdrawals before age 59½ are subject to a 10% federal penalty tax unless an exception applies. 30 Starting early can make a substantial difference mostly because of how much earnings compound. Pay for unexpected plumbing problem Make catch-up contributions Pay for my daughter s wedding Plan best friend s 60th birthday Take up kayaking Enjoy retirement! Replace car Remodel the kitchen Help parents with expenses Pay off mortgage Spoil my grandchild 5
1 Frederick Age: 41 I m saving for my retirement. But I have way too many bills right now to think about putting away more for my future. Sign up for yoga class Increase my retirement contributions Visit Yosemite National Park Pay for unexpected plumbing problem Open a college savings account Take a beach vacation Continue my education Replace car Celebrate graduation Land first full-time job Start saving for my retirement Adopt a Cocker Spaniel Get married Move into my first home Sign up for yoga class Increase my retirement contributions Visit Yosemite National Park 6 Begin repaying my student loans Rent and furnish an apartment Welcome a new baby Buy a family car Open a college savings account Take a beach vacation Continue my education
The time is now to avoid getting sidetracked At this stage of your life, you may be more focused on how you ll pay for a child s college education or buying a new car than your retirement. Saving for multiple goals is part of life, but there are good reasons why retirement should remain high on your priority list. Saving for multiple goals Putting money aside for a child s college education is very important. Just remember that scholarships and financial aid can help with college costs. And there are low-interest loans. Need a new car? Again, you could get a low-interest loan. But you won t be able to finance your retirement that way. How much should I save? Consider saving 12% to 15% of your pay each year for retirement, including any contributions your employer might make. If you re well below this amount and you can get on track now, that s great. If you can t afford to make a big change, make a small one. Even an increase of one or two percentage points can make a big difference in how much money you ll have when you retire. Plus, you can always increase it again later. It may cost less than you think When you take taxes into account, it can cost less than you might expect to save more for your retirement. If you save on a pre-tax basis, every dollar you save through the plan comes out of your paycheck before federal income taxes are withheld. This most likely will mean an immediate tax break of at least 10% of the amount you set aside for your retirement.* *Exact amount of tax savings depends on your tax bracket. Pay for unexpected plumbing problem Make catch-up contributions Pay for my daughter s wedding Plan best friend s 60th birthday Take up kayaking Enjoy retirement! Replace car Remodel the kitchen Help parents with expenses Pay off mortgage Spoil my grandchild 7
55 Susan Age: 55 I wish I d saved more when I was younger. Now it feels like I ll never be able to retire. Make catch-up contributions Pay for my daughter s wedding Plan best friend s 60th birthday Take up kayaking Enjoy retirement! Remodel the kitchen Help parents with expenses Pay off mortgage Spoil my grandchild Celebrate graduation Land first full-time job Start saving for my retirement Adopt a Cocker Spaniel Get married Move into my first home Sign up for yoga class Increase my retirement contributions Visit Yosemite National Park 8 Begin repaying my student loans Rent and furnish an apartment Welcome a new baby Buy a family car Open a college savings account Take a beach vacation Continue my education
The time is now to catch up on retirement Once you re within ten years or so of when you d like to retire, you may realize you haven t saved enough to live the life you want. If that sounds like you, now is the time to kick your savings into overdrive. Annual contribution limits The good news is that there s almost no limit to how much you can save for your retirement. As far as saving in your employer s plan, the IRS does put an annual limit on how much you can contribute. In 2017, the limit is $18,000. Want to save more? Guess what? You can, provided you re age 50 or older and your plan allows catch-up contributions. For 2017, the IRS will let you contribute an additional $6,500 to your plan account. Ways to save even more If you d like to save even more, you can contribute to an IRA or a nonretirement account. There s no denying that catching up on retirement savings can be challenging. But if you make a stronger commitment to saving, you might be surprised at how much you can accumulate in 15, 10, or even 5 years. That would bring the grand total of how much you can save in the plan in 2017 to $24,500. Pay for unexpected plumbing problem Make catch-up contributions Pay for my daughter s wedding Plan best friend s 60th birthday Take up kayaking Enjoy retirement! Replace car Remodel the kitchen Help parents with expenses Pay off mortgage Spoil my grandchild 9
now The time to save more is Increase Take control your of savings your financial rate today future for a more by making comfortable sure you re tomorrow. saving Log enough on to retirementplans.vanguard.com in your employer s plan. or call 800-523-1188 and take control of your Increase your savings rate today financial future. for a more comfortable tomorrow. Find the answers you re looking for Vanguard s MoneyWhys education and news center is a great place to turn when you have questions about investing. Want to see how saving more will affect your pay? Curious how much monthly income you ll need in retirement? Get answers to these and other questions, crunch your numbers, watch videos and more at vanguard.com/moneywhys.
Ways to cut expenses Packing your lunch, brewing coffee at home, taking a more modest vacation these can all be great ways to trim expenses, provided they don t make you feel as if you re depriving yourself. If that sounds like too much sacrificing for you, or if you re already doing those things, here are some painless ways to find more money for retirement: Save your raise. If you get a raise at work, put that extra money in your retirement plan account. This boosts your savings without reducing your take-home pay. Find a lower credit card rate. If you don t always pay off your credit card balance each month, make sure your card has a relatively low interest rate. You can switch credit card companies or call the phone number on your existing credit card and ask whether you qualify for a lower rate. Adjust your tax withholding. If you get a tax refund, you re lending money interest free to Uncle Sam. Consider increasing the number of withholding allowances on your Form W-4 to have less money withheld. Refinance your mortgage. A lower rate could mean paying thousands of dollars less in interest over the life of your loan. Just make sure you ll recover the closing costs within the time you plan to stay in your home. Shop around for insurance. You need car and other types of insurance, but you don t want to pay too much. Costs can vary quite a bit from one insurance company to another, so do some research. 11
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