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New Mexico State University

New Mexico State University

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Savings and Investments Can Make Retirement More Secure

LAS CRUCES--As retirement approaches, people become more concerned about their future. Savings accounts are a good way for people to provide for themselves, without depending so much on the stability of the Social Security system, said a New Mexico State University consumer education specialist.

"Lack of preparation is a concern for many people approaching retirement," said Susan Wright with NMSU's Cooperative Extension Service. "Ideally, a retirement plan includes three sources of income--Social Security, a pension and savings."

A recent study by the American Association of Retired Persons revealed that women usually receive 25 percent less than men in Social Security benefits. It also found that employers are offering fewer pension plans to their employees and many individuals have very limited savings. All of these findings indicate that most people have a less-than-ideal retirement situation, Wright said.

"It seems to be a greater concern for women because they tend to live longer and many fear they will outlive their savings," Wright said. "However, it is never too late to take actions that will enhance retirement prospects."

First, people need to determine their current financial status, so they can figure out what their needs during retirement will be. It is estimated that retirees need 65-70 percent of their work income to live at the same level after retirement, she said.

Examine expenses now and cut back where possible. Then, add the amount saved to a savings account each month. Investing in a mutual fund or the stock market can help retirement funds grow.

"Be sure to do your homework before deciding what investment route to take," she said. "You may be able to get helpful advice from a trusted family member or friend or consult a reputable financial planner."

Treating savings as a monthly expense is very important to establishing a secure future, she said. Budget for a savings deposit each month. Contribute to an IRA or participate in 401k plans at work, especially if the employer matches all or part of personal contributions.

Starting savings accounts early means that less of a deposit is needed each week to make retirement more secure. "Studies have shown that if at age 25 you wait one year to save $10 per week, it will cost you more than $12,000 in retirement. If at age 40 you wait one year to save $50 per week, it will cost you $18,000 in retirement," Wright said.