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Does your retirement seem light years away? While it may appear a long way off, you owe it to yourself to look toward the future and begin giving some thought to what you can do today to help ensure a bright retirement tomorrow. Although time may be on your side, if you quiz some of the seniors you know, they will probably tell you that saving for retirement is not as simple as it may initially appear.Here are four key factors to consider that may ultimately influence the type of retirement you will enjoy:
| 1. | Inflation. You are probably aware that, over time, inflation can erode your savings. But, just how seriously do you take inflation? At 3% inflation, $100 today will be worth only $67.30 in 20 years-a loss of one-third of its value. Thus, it is important to seek retirement savings vehicles that have the best chance of outpacing inflation.
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| 2. | Taxes. Your present income level, tax bracket, and the types of tax-deferred retirement savings plans that are available to you can all play an integral part in how much money you can amass for your retirement. By maximizing your pre-tax contributions to employer-sponsored plans and Individual Retirement Accounts (IRAs), you can help take advantage of the tax-deferred benefits of such plans.
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| 3. | Discipline.Becoming a disciplined saver is one of the key components of retirement plan success. By making regular contributions to your employer-sponsored retirement plan and your IRA, you can maximize the power of compound interest (the interest earned not only on the initial principal, but also on the accumulated interest from prior periods). With a steady flow of contributions, your retirement savings have a greater chance of accumulating to meet your long-term goals.
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| 4. | Personal Savings.Taking into account the effects of inflation and taxes, there is a distinct possibility that your retirement plan income may eventually fall short of your needs, especially during a long retirement. Also, Social Security generally provides only a percentage of most retirees' income, and its future is in question. Thus, to avoid a potential shortfall, it is essential to start planning today to supplement traditional retirement income sources with your own personal savings.
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Of course, understanding these principles alone is no guarantee of future success. However, the sooner you begin to recognize the effects that economic and financial forces can have on your retirement income, the more likely you will be to adopt current strategies that can help you achieve your long-term objectives. By taking action now, you can help increase your chances of brightening your "golden" years ahead.
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