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New Mexico State University

New Mexico State University

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Plan Now for a Comfortable Retirement

LAS CRUCES -- As people grow older, they start thinking about retiring. Most middle aged and older people wonder about what it will be like to retire, where they will live and how well they will live.

At age 65, the average life expectancy is 14 more years for men and 19 more years for women. "With proper planning, retirement years can be among the best," said Susan Wright, a consumer education specialist with New Mexico State University's Cooperative Extension Service. "But for those who have not prepared for retirement, things may not look as rosy."

Planning for retirement is essential to ensure independent living, she said. Financial security is a major concern, and recent government reports indicate that many people have little or no savings on which to rely when they retire. At the same time, many believe that Social Security will not be able to support all who are relying on it as part of their retirement income.

"For most people, Social Security will not be enough to support a comfortable retirement," Wright said. "Social Security payments are roughly indexed to inflation to take care of only about one-third of a person's financial needs. Private pensions, personal savings and investments must be relied on for the remainder of the support needed."

Savings needs vary greatly when it comes to calculating how much to save for retirement. Generally, taxes and living expenses will be lower after retirement, Wright said.

"With that in mind, you will probably need about 70 to 80 percent of your present income to maintain your current standard of living," she explained.

From that figure, subtract any anticipated Social Security and pension, Wright advised. The remainder will be needed from savings and investments. Add to that figure about 5 percent for inflation for each year until retirement.

"If you expect to retire in about 15 years and your estimated need is $1,000 each month, actually more than $2,000 will be needed when you retire," she said.

People between the ages of 20 and 50 should save at least 10 percent of their income in anticipation of retirement. Investing it in long-term, tax-deferred programs is a good idea, Wright said.

"Time will definitely be on the side of the younger person, but only if savings/investments are made on a regular basis and left to grow," she said.

For people older than 50, it is important to reduce expenses and increase savings. At least five years before retirement, reduce or eliminate debt, maximize savings and invest in income- oriented, low-risk investments.

"If you have concerns about your financial situation for retirement, you can consult a professional financial planner," Wright said. "A number of books that give sound advice for retirement planning also are available."
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