The Peoples Bank

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.

Retirement Frequently Asked Questions

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.

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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.

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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.

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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

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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

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