Saturday, December 10, 2011


I thought I'd spend a post talking about retirement in general, before moving on to specific ways to help save money for retirement.  I also have posts on retirement saving strategies and retirement investment strategies.

Wait a minute... We're college students.  Why do we need to bother thinking about retirement?  Retirement is on the minds of many people as they start their careers, and in a way it is kind of sad (what to do with all that time?).  What exactly is retirement?  It is essentially when you stop being employed and stop looking for a job.  Some people adopt an entirely different lifestyle since they don't work anymore.  People may help take care of grandchildren or follow a hobby or sport such as golf.  Sometimes it comes with depression which is understandable, especially in cases when retirement occurs not because of choice but because of disability or some other factor.  As you get older and your health fails you more often, you will need more money for medical expenses and will most likely need to draw from a fund you have saved up since you don't earn any current income at that point.

There are a couple factors you have to consider when you are looking at retirement.  What age do you plan to retire?  How much annual income would you need to draw from your retirement fund to support your lifestyle?  The longer you wait till you retire, you will have more years of earning income and fewer years of living off your stash (which makes it easier on your savings).  Also, instead of a luxurious lifestyle, aim for a comfortable one so that you won't have to save a fortune after retiring.  Also, starting early is key since the magical effects of compounding can help grow your money especially if it is for 50+ years into the future.

A lot of people look for a specific amount of wealth they aim to get before they can retire, but it is generally unique to each of us how much we need to retire safely.  It will always be uncertain the exact length of time we will live and how much in medical costs we will need when we retire.  Thankfully, there are plenty of tools we can use to help us retire such as annuities or IRAs.  There are also employer sponsored retirement plans like a 401k.  Especially as college students about to enter into the workforce, it is important to know what tools we should use to help us retire with enough wealth to sustain the rest of our lives.  And, if you want to minimize the amount you'll need to retire, you will want to retire as late as possible and have as minimalist a lifestyle as possible.  A more luxurious lifestyle after retirement will require a lot more money and it will be much easier to meet that goal if you start planning now.

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