DREAMS. Those are what retirement is all about. Reaching your own pinnacle of success. Having the things you've always wanted and the time you need to enjoy them. You might spend more time with loved ones, catch up with lost friends and go to places you've only been able to dream about. What kind of future have you provided for yourself? What are your retirement dreams? No matter what your plans are for retirement, you can be sure you'll need money. Below are just a few questions that may help you prepare for those dreams.
What's a good way to start saving for retirement?
How much can I contribute each year to my Individual Retirement Account (IRA)?
How can The Peoples Bank help me save for my future?
How early should I begin saving for retirement?
How much will I need to save for retirement?
How long will my money last?
The cost of procrastination
Life Hours: What you actually make (Motorcycle Mary - Motivational Financial Humorist)
Retirement Calculator
What's a good way to start saving for retirement?
Traditional IRAs and Roth IRAs are two great ways to invest for retirement. Anyone who has earned income - even a minor - can contribute to an IRA, and a wage earner can contribute on behalf of a spouse who has little or no earned income, provided they file taxes jointly. Total IRA contributions cannot exceed the total income earned by you and your spouse.
How much can I contribute each year to my Individual Retirement Account (IRA)?
Individual Retirement Accounts or IRAs are investment vehicles that permit individuals to set aside funds for a secure future and retirement. IRA account holders are afforded the benefits of tax-deferred earnings, and, possibly, income tax deductions for contributions.
Maximum contribution limits for Individual Retirement Accounts (IRAs) have increased beginning in 2002, and will continue to increase through 2008. In addition, a new "catch-up" provision allows qualifying participants, age 50 or older, to accelerate their contributions. The chart below summarizes the new limits for both individual and joint contributions.
| Maximum Contribution Chart Traditional & Roth IRAs | ||||
| Under Age 50 Individual |
Joint | Age 50+ Individual |
Joint | |
| 2001 | $2,000 | $4,000 | n/a | n/a |
| 2002- | ||||
| 2004 | $3,000 | $6,000 | $3,500 | $7,000 |
| 2005 | $4,000 | $8,000 | $4,500 | $9,000 |
| 2006- | ||||
| 2007 | $4,000 | $8,000 | $5,000 | $10,000 |
| 2008+ | $5,000 | $10,000 | $6,000 | $12,000 |
Opening an IRA at The Peoples Bank is easy! Come in to one of our locations, and we will give you the one-on-one attention you need and deserve. All deposits are FDIC insured (maximums may apply) allowing a safe way to save for retirement.
How can The Peoples Bank help me save for my future?
The Peoples Bank makes it easy for you to choose and manage your retirement investments. We offer most types of tax-deferred plans, including 401(k) plans, traditional IRAs, Roth IRAs and SEP-IRAs. You can choose to invest and manage your account, or you can have The Peoples Bank make the investment decisions for you. Whatever type of account you choose, you'll find our service is excellent.
Please click here to learn more about Trust and Investment Services.
How early should I begin saving for retirement?
The sooner you start, the larger your nest egg is likely to be when you retire. Time magnifies the power of compounding, (The accrual of interest earned on an investment and its reinvested earnings) which can make the same dollar worth significantly more the earlier you put it away. You also benefit from the following incentives:
Reduced taxes - Most retirement plans offer an immediate deduction from your federal income taxes.
Increased contribution limits - The 2001 tax law raised contribution limits to IRAs and provided for catch-up contributions if you're age 50 or older. Please look at the below chart to see these limits.
Tax-deferred growth - Earnings on your retirement investments grow tax-deferred or tax-free, depending on which savings vehicle you choose.
| Maximum Contribution Chart Traditional & Roth IRAs | ||||
| Under Age 50 Individual |
Joint | Age 50+ Individual |
Joint | |
| 2001 | $2,000 | $4,000 | n/a | n/a |
| 2002- | ||||
| 2004 | $3,000 | $6,000 | $3,500 | $7,000 |
| 2005 | $4,000 | $8,000 | $4,500 | $9,000 |
| 2006- | ||||
| 2007 | $4,000 | $8,000 | $5,000 | $10,000 |
| 2008+ | $5,000 | $10,000 | $6,000 | $12,000 |
How much will I need to save for retirement?
One rule of thumb is that you'll need to replace at least 70% to 80% of your income before retirement. Of course, your situation may be different. Other factors also come into play, such as your lifestyle, your health, and the inevitable effect of inflation. Remember to do a financial checkup every couple of years - or every year as you near retirement - just to be sure you're still on track.
How long will my money last?
It may help you to know how much money you will need to live out a long retirement. Here are some examples of how long your savings might last:
| Starting with this much | You can withdraw this much each month for 10 years | You can withdraw this much each month for 20 years | You can withdraw this much each month throughout retirement |
| $50,000 | $535 | $337 | $222 |
| $100,000 | $1,069 | $674 | $443 |
| $150,000 | $1,604 | $1,011 | $665 |
| $200,000 | $2,138 | $1,349 | $886 |
| $250,000 | $2,673 | $1,686 | $1,108 |
| $500,000 | $5,345 | $3,372 | $2,216 |
| $750,000 | $8,025 | $5,055 | $3,330 |
Based on 5.5% annual yield compounded quarterly.
Investment performance can dramatically affect these
numbers. Inflation can also seriously affect the value of
withdrawals. Amounts shown do not reflect the impact of tax
earnings. Your actual return will vary depending on your
investment and your tax bracket.
The cost of Procrastination
John opens an IRA at age 19 and invests maximum for next 6 years
Bill opens an IRA at age 26 and invests maximum for next 37 years
Jane opens an IRA at age 19 and invests maximum for next 43 years
All three earn a hypothetical rate of 6% annual rate of return
| John |
Bill |
Jane |
||||
| Age | Contribution | End of Year Value |
Contribution | End of Year Value |
Contribution | End of Year Value |
| 19 | $3,000 | $3,180 | $3,000 | $3,180 | ||
| 20 | $3,000 | $6,551 | $3,000 | $6,551 | ||
| 21 | $3,000 | $10,124 | $3,000 | $10,124 | ||
| 22 | $3,000 | $13,911 | $3,000 | $13,911 | ||
| 23 | $3,000 | $17,926 | $3,000 | $17,926 | ||
| 24 | $3,000 | $22,182 | $3,000 | $22,182 | ||
| 25 | $3,000 | $26,692 | $3,000 | $26,692 | ||
| 26 | $28,294 | $3,000 | $3,180 | $3,000 | $31,474 | |
| 27 | $29,992 | $3,000 | $6,551 | $3,000 | $36,542 | |
| 28 | $31,791 | $3,000 | $10,124 | $3,000 | $41,915 | |
| 29 | $33,699 | $3,000 | $13,911 | $3,000 | $47,610 | |
| 30 | $35,720 | $3,000 | $17,926 | $3,000 | $53,646 | |
| 31 | $37,864 | $3,000 | $22,182 | $3,000 | $60,045 | |
| 32 | $ 40,136 | $3,000 | $ 26,692 | $3,000 | $ 66,828 | |
| 33 | $42,544 | $3,000 | $31,474 | $3,000 | $74,018 | |
| 34 | $45,096 | $3,000 | $36,542 | $3,000 | $81,639 | |
| 35 | $47,802 | $3,000 | $41,915 | $3,000 | $89,717 | |
| 36 | $50,670 | $3,000 | $47,610 | $3,000 | $98,280 | |
| 37 | $53,710 | $3,000 | $53,646 | $3,000 | $107,357 | |
| 38 | $56,933 | $3,000 | $60,045 | $3,000 | $116,978 | |
| 39 | $60,349 | $3,000 | $66,828 | $3,000 | $127,177 | |
| 40 | $63,970 | $3,000 | $74,018 | $3,000 | $137,987 | |
| 41 | $ 67,808 | $3,000 | $ 81,639 | $3,000 | $149,447 | |
| 42 | $71,877 | $3,000 | $89,717 | $3,000 | $161,594 | |
| 43 | $ 76,189 | $3,000 | $ 98,280 | $3,000 | $174,469 | |
| 44 | $ 80,761 | $3,000 | $107,357 | $3,000 | $188,117 | |
| 45 | $85,606 | $3,000 | $116,978 | $3,000 | $202,584 | |
| 46 | $90,743 | $3,000 | $127,177 | $3,000 | $217,919 | |
| 47 | $96,187 | $3,000 | $137,987 | $3,000 | $234,175 | |
| 48 | $101,958 | $3,000 | $149,447 | $3,000 | $251,405 | |
| 49 | $108,076 | $3,000 | $161,594 | $3,000 | $269,669 | |
| 50 | $114,560 | $3,500 | $174,999 | $3,500 | $289,559 | |
| 51 | $121,434 | $3,500 | $189,209 | $3,500 | $310,643 | |
| 52 | $128,720 | $3,500 | $204,272 | $3,500 | $332,992 | |
| 53 | $136,443 | $3,500 | $220,238 | $3,500 | $356,681 | |
| 54 | $144,630 | $3,500 | $237,162 | $3,500 | $381,792 | |
| 55 | $153,308 | $3,500 | $255,102 | $3,500 | $408,410 | |
| 56 | $162,506 | $3,500 | $274,118 | $3,500 | $436,624 | |
| 57 | $172,256 | $3,500 | $294,275 | $3,500 | $466,532 | |
| 58 | $182,592 | $3,500 | $315,642 | $3,500 | $498,233 | |
| 59 | $193,547 | $3,500 | $338,290 | $3,500 | $531,837 | |
| 60 | $205,160 | $3,500 | $362,298 | $3,500 | $567,458 | |
| 61 | $217,470 | $3,500 | $387,745 | $3,500 | $605,215 | |
| 62 | $230,518 | $3,500 | $414,720 | $3,500 | $645,238 | |
| 63 | $244,349 | $3,500 | $443,313 | $3,500 | $687,662 | |
| 64 | $259,010 | $3,500 | $473,622 | $3,500 | $732,632 | |
| 65 | $274,551 | $3,500 | $505,749 | $3,500 | $780,300 | |
| Total Contributions | $(21,000) | $(128,000) | $(149,000) | |||
| Net Earnings | $253,551 | $377,749 | $631,300 | |||
Life Hours: What You Actually Make
| $10.00 | Paid per hour |
| -$3.00 | Tax |
| $7.00 | Take-home per hour |
In an 8 hour workday, you'll earn not $80, but $56 in spendable income. Not $1,250, but $875 in spendable income a month. Not $15,000, but $10,500 in spendable income a year! How many life hours are you working to pay for useless things in your life? $21.00 of "not really needed" items in your shopping basket literally means you worked from 7am to 10:00am to purchase wants, or materialistic things, when you could have been working from 7am to 10am to pay for needs, such as rent, groceries, etc. Setting aside just a small amount each month for retirement on a consistent basis could make a world of difference in what you have saved when that day finally arrives.
| Pay Per Hour | Taxes | For every hour you Work | Spendable Income for 8 hour day |
| $20 | $6.00 | $14.00 | $112 |
| $15 | $4.50 | $10.50 | $84 |
| $10 | $3.00 | $7.00 | $56 |
| $8 | $2.40 | $5.60 | $44.80 |
| $6 | $1.80 | $4.20 | $33.60 |
