Retirement Planning 101
While your retirement may seem a long way off, you owe it to yourself to look toward the future and begin thinking about what you can do today to help ensure a secure retirement tomorrow. Although time may be on your side, if you ask some of the retirees you know, they will probably tell you that saving for retirement is not as simple as it initially appears.

Here are four key factors to consider:

1) Inflation. You may be aware that, over time, inflation can erode your savings. But, many don't realize the potentially serious effects of inflation. At 3% inflation, $100 today will be worth only $67.30 in 20 years—a loss of one-third of its value. At 35 years, this amount would be further reduced to just $34.44. Thus, it is important to seek retirement savings vehicles that have the best chance of outpacing inflation.

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 save 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.

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 consistent contributions, your retirement savings have a greater chance of accumulating to meet your long-term goals.

4) Personal Savings. Considering the effects of inflation, there is a distinct possibility that your retirement plan income may fall short of your needs, especially during a long retirement. Also, Social Security generally provides only a percentage of retirement income. Thus, to avoid a potential shortfall, start planning to supplement traditional retirement income sources with your own personal savings.

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 strategies that can help you achieve your long-term objectives. Being proactive today can help increase your chances of having a secure retirement tomorrow.

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