Friday, April 27, 2012
Planning For Your Childrens' Retirement
More and more, it seems that retirement has become a dream for a lucky few. Even those who have enjoyed a full career with a promised pension have begun to find that their living expenses often far exceed what they receive every month for pay. More often than not, it's the high cost of health services that eat away at savings and other retirement income. If the situation is as bad as it is now, can you imagine what it will be like when your children reach retirement age? It could be argued that there are two financial things that a parent should help prepare their children for. The first is college, and the second is retirement. The reason for this is that those who are born now will likely be retiring in around the year 2070. By that time, a staggering $250,000 or more could be considered a modest annual income, based on a 4% inflation rate. Although difficult to fathom, there's just no telling what could happen over the next sixty years that might impact your childrens' ability to retire. One solution you might entertain is starting your youngster out on a retirement savings plan. Savings bonds are a phenomenal way to build savings, and the best vehicle for a youngster's retirement account. They're easy to purchase, have historically reasonable returns, and depending on how soon you start their account up, can build up to quite a lot of savings over the course of their childhood. Another benefit is that if something should happen to you, savings bonds are a way to prevent your child's retirement savings from being eaten up by inheritance taxes. The bonds are already in their name, and while the income taxation sixty years from now is at best murky, there is a possibility that they won't have to pay as much in taxes as long as they use the bonds after they've retired, particularly if social security doesn't hold out. Consider for a moment that you've just had a baby. If you put away just $25 per week in a savings bond account, which on average returns a historic 4.5% interest rate (though this is an average, the number varies depending on how the federal government issues the bonds) then by the time 30 years is up, the account will have amassed no less than $77,000. Taking the calculation a step further, by your child starting a 401-k with $77,000 and contributing $5,000 per year until they retire at 65, considering that they make approximately $50,000 per year, they will have between 3-4 million dollars available to retire on. In an era when we are concerned about our own ability to retire, keeping our children in mind might be a little tough. Even saving a little bit for them early in life, though, can mean the difference between your kids being able to retire when the time comes, and them having to work for the rest of their lives just to make ends meet. Thanks to advancements in health technology and new awareness of eating right and staying healthy, it is very conceivable that your children could find themselves with thirty to forty “golden years” in which to enjoy what they spent their lives working for. By starting them out now, when they don't even know what retirement means, you're giving them the best chance to make the most of those years, which could be the best gift you've ever given them.