Saving for Retirement
Your First Step To Pursuing Retirement. Building wealth takes real commitment. Today, with all your immediate financial concerns — paying bills, buying groceries, filling the car with gas — it's sometimes easy to let your long-term financial objectives take a back seat. But you want to retire someday, so it's important to build an investment strategy designed to withstand the impact of market volatility, taxes, and inflation.
Such a strategy can require discipline and diligence — but the first step is simple: You just have to get started.
What is an Annuity? An annuity is a long-term, tax-deferred vehicle designed for retirement. Variable annuities involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½.
Why is it important to start putting your money to work as early as possible? If you wait, you'll miss out on the potential benefits of compounding—or the process by which the value of an investment can increase because earnings, both gains and interest, can earn interest as time passes. The table on the right illustrates the potential power of compounding over time.
Susan and Sally are the same age. Susan invests $10,000 per year for 10 years and stops. Sally waits to begin investing until 10 years after Susan, then invests $10,000 per year for 25 years. Assuming a hypothetical rate of return of 8 percent for both, Susan will have more money than Sally, despite investing significantly less overall. It's all about the power of compounding.
What other obstacles might you face in building the kind of nest egg that can take you to and through retirement?
Reduce The Impact Of Taxes
In today's economy, Americans could spend more on taxes in a given year than on food, housing, and clothing combined.1 And when you've made the commitment to earmark money for retirement that ends up being reduced by taxes, it's like taking two steps forward and one step back. Using strategies to minimize taxes throughout your lifetime can go a long way toward building your retirement.
1 Paul Bedard, Washington Examiner, "Americans Spend more on taxes than food, clothing, housing combined," April 6, 2016.
Another way to avoid letting your money slip away is to rein in your own spending, especially when it comes to big-ticket purchases. This chart can help you determine how sacrificing a luxury today can pay off big in the long run when placed in a tax-deferred investment.
Be Prepared For Higher Prices
It seems like everything is more expensive these days and it's likely to be even more expensive when you retire. That's why you should think about the impact inflation will have on your future buying power. If your nest egg doesn't grow faster than the cost of living, your dollar won't buy as much as it used to. It's important to consider investment vehicles that can help grow the money you save so you can maintain your current lifestyle in your Golden Years.
Riding The Investment Roller Coaster
If you choose to invest in the stock market, at some point, your investments will experience the effects of market volatility. Some investors have an emotional reaction when the markets head south and pull their money out or wait too long to start investing. This can result in missing out on significant gains as the market rebounds. A financial plan that addresses your tolerance for risk can help you stay invested through all the market cycles and stay prepared for potential growth. In any case, be sure to consult a financial professional who can help guide you through the ups and downs of the market.
Learn more about how tax deferral and other long-term investing strategies can help you pursue your retirement goals with our guide to Investing Principles.
Retirement Hub for iPad®
We provide interactive apps to help make even the most advanced investment concepts easy to understand.
These calculators will help you determine whether you’re on track for your personal financial goals.
Explore the investment freedom and flexibility of our various annuity offerings.