1. The probability of Social Security benefits that do not provide adequate money for long-term, or a lifestyle after retirement.
2. That exceed your expectations of life savings
3. The possibility of an unexpected major event in the economic life
4. The impact of inflation on your savings
Social Security
When thinking about retirement, many people think that Social Security payments will be based on your financial security. It is also true that this government program will continue to be part of the annual income of most retirees. But the reality is that Social Security will be a lot less money than many imagine.
Three factors are determined of how you receive Social Security:
• The number of years you worked and paid taxes
• The total amount of annual income (which will be adjusted for inflation)
• The age you have when you start receiving benefits (the minimum age for receiving Social Security benefits is usually 67 years for those born after 1960).
A typical worker earning $ 50,000 and retire with 65 years would receive $ 16,000 annual Social Security, that is, less than a third of his previous earnings. If you want to narrow the income gap between Social Security and what was used to winning, you should consider other sources.
You (or your spouse) might be lucky and receive a fixed pension from his/her previous work, which is a substantial difference. But, as ever more normal, employers that offer such pensions, seek to contribute to a tax-deferred account rather than promising a fixed amount. Then it's up the option of investing your money wisely and save on any tax-deferred plan (such as 401 (k)) or invest on your own for retirement.
Life expectancy
Most Americans began his professional life around 21 years and hope to retire at 65. Although there is obviously no guarantee of your own life expectancy when planning your finances, it is interesting that many Americans live to 85 or 90 years. This means that you must save and invest enough money for yourself for another 20 or 25 years after retirement.
Unexpected major events or economic life
Are you financially prepared to withstand an unexpected event in life, such as loss of spouse, loss of a job, a long-term illness or loss of home due to a natural disaster? Would it have saved money to continue paying the monthly bills and you lose some or all of your income, or if you have accumulated huge unexpected costs? What if the economy or the markets change and retirement or pension plan maintained or your home loses value?
No savings or investments, an unexpected change in life can force you to quickly take tough decisions such as whether or not:
• to personal loans
• acquire significant debt and high potential for credit card interest
• acquire a second job and return to work or look for different types of jobs or income
• delay in important personal goals
• important assets such as selling the house which will not be able to afford your payments
Unfortunately it is often a significant event, a family member who is uninsured or has very low insurance and have a medical emergency, loss of a job or spouse, a workplace injury or car accident, can begin a rapid spiral into a debt that can have long term consequences, including bankruptcy. Have at least enough money saved to meet 6 months of expenses in the event of an emergency will give greater financial ability and flexibility to try to address the immediate financial challenges of this sudden change in life. It will also help reduce or avoid getting a debt to handle the crisis, which will reduce the financial impact on you or your family in a very difficult time.
The fact that markets and the economy always grows, as we have witnessed the most recent recessions in 2001 and in 2008-09, is a further reminder of the value of savings and investments plan from an early age.
Inflation
In this case, inflation can substantially reduce your savings. Do not despair, because inflation is inevitable, you can plan to prevent and compensate as it grows. When it comes to an investment plan or long-term savings, a good rule is to add a further money annually to cover the cost of inflation.
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