Retirement Planning Overview
Consider retirement planning. First, have you started the early stages of planning your retirement? The first step is identifying what finances will support or fund your retirement. To make this process easy, think of your retirement as a three-legged stool. The first leg is Social Security. The second leg is pension. Last but not least, the third leg is personal savings.
Social Security assists all Americans, at some point in their lives. The money paid to Social Security later pays for workers who become disabled, or it helps families who lose a spouse or parent. Most beneficiaries of Social Security include retirees and their families. However, Social Security does not replace an entire income. The wages from Social Security replaces about 40% of an average wage earner’s income. Because Social Security cannot be a retirement plan on its own, you need the other key components to have a successful retirement.
A pension is built by a sum of money added to a fund during a person’s employed years. Once the fund is built and the person retires, the person then receives payment periodically to fund retirement. Pension availability varies based on your job or career. A pension fund replaces about 50% to even 85% of a person’s income, based on various factors. Pension works best combined with another source of income for retirement.
Some statistics show that Americans, on average, save less than 5% and live paycheck to paycheck. Funding personal savings has value well before funding retirement. Personal savings provides a cushion and emergency fund, should you ever need one. Once retired, personal savings helps fund the little things. Maybe take a vacation, or do something else you missed while you were in the workforce.
Overall, the key components of retirement planning are Social Security, pension, and personal savings. However, did you know that life insurance has the potential to create a more comprehensive retirement income plan? Most people see life insurance simply as a means to protect a family in the event that the breadwinner dies during their working years. It’s so much more than that though! It can help protect your income, provide tax-free cash flow, help manage taxes, and so much more!
Since insurance is oftentimes overwhelmingly confusing, we want to shed light on this industry by answering YOUR questions. So if you have any questions or concerns, comment below and your question may be the topic of our next article!
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