In my previous posts I reviewed the need for a good retirement planning as well as the different retirement planners and options. To continue my thoughts, today I will be reviewing the different standards of retirement income e.g. having retirement plan is not the end of the work, making sure that retirement plan will be adequate to your needs in your late years is what matters more.
A standard employer-sponsored retirement savings plan such as a 401(k) is the mainstay in most financial retirement plans.
Individuals can utilize a standard IRA or Roth IRA also. Many self-employed people opt for a Self-Directed 401(k). Relying on a standard retirement savings plans will prove unsatisfactory as it generally will fall way short of your retirement income needs. However, faced with a choice of having a standard retirement savings plan (e.g. a 401(k), standard and non-standard IRAs etc.) versus having no retirement savings plan at all, I would definitely prefer to have even a standard 10% of my earnings invested in standard retirement plan than in nothing at all. If nothing else it’s a good habit to “save and invest” a % of your income. However, unless you are putting away large chunks of cash into your retirement plan, it alone is probably not going to give you more than a lower-middle class lifestyle during your retirement.
Typically, if your retirement income needs are modest, social security benefits may provide 20-30% of your retirement income whilst employee-sponsored retirement plans may provide 20%. Therefore, it is your personal savings and investment strategies that will be the key differentiators between you living off cat food or caviar!
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