Proper retirement and estate planning is the key to having the resources to enjoy one’s golden years and leave a legacy to one’s heirs. Two of the biggest obstacles to avoid on the way to these goals are procrastinating about saving for retirement, and accumulating unmanageable debt.
It may be understandable that retirement is the last thing on young people’s minds, but it is also regrettable, because the earlier one begins to save for retirement, the easier it is to build a comfortable nest egg. Someone who saves $100 per month beginning at age 25 will have saved over $300,000 by age 67, assuming a rate of return on investment of 7 percent. Saving the same amount of money per month but not starting to save until age 40 would result in savings of less than $100,000.
The Social Security system is more stable than some critics would lead one to believe, but Social Security retirement benefits provide only a safety net, not enough to retire in comfort. Employer pensions are very nearly a thing of the past. Much of the responsibility of providing for one’s retirement is up to the individual. A 401(k) plan, especially with an employer contribution, can be a tremendous help, and can motivate even young workers to save. The key is to avoid procrastination in saving for retirement.
Debt is the other major issue that can adversely impact retirement planning and estate planning. With too much debt, many older Americans find they cannot afford to retire, much less leave a substantial estate to their heirs. To get control of debt, it is important to focus on paying down high-interest debt first, such as credit cards.
Debt – even a healthy, manageable amount – can affect estate planning in less obvious ways as well. For instance, if you are planning to provide for some heirs through a trust and others through a will, you should be aware that debts must be paid from your estate and consider how that will affect your bequests.
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