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America Saves Week - Tip #5

How Much Will I Need to Retire?

BEECHER, IL (February 24, 2012) – Question: With no other income, how much must someone who retires at 65 have saved in order to be assured of an annual income of $50,000? Answer: A male at age 65 should have $620,000 saved to ensure an average income of $50,000 a year for life, and a female at age 65 should have $665,000.

Seem impossible? With proper planning and a little discipline, it's easier than you may think. The key is to start putting away money in an IRA, 401(k) or other tax-deferred account as soon as possible to take advantage of the power of compounding. Both the money you put into the account and any earnings it produces are tax-deferred until you withdraw, usually in retirement. Tax deferral means your account has the potential to compound faster, since you don't have to take out any of your earnings to pay annual income taxes.

Tax advantages aren't the only upside to participating in employer-sponsored retirement plans. You may get some free money! In some cases, your employer may also contribute by matching some portion of your own contribution. For example, some employers add 50% of what you put in, or 50 cents for every $1, up to 6% of your salary. So if you make $50,000 and contribute 3%, or $1,500 annually, then your employer adds another $750 to that fund. That's like getting a 50% return on your investment! The more you add, up to the limit, the more matching you're eligible for. The maximum annual contribution allowed has recently been increased to $17,000 ($22,500 for those 50 and older). If you are able to max out your contributions each year, you will see your retirement fund grow quickly and steadily. However, if you can't afford to contribute that much, you should contribute at least enough to fully benefit from your employer's contribution.

About First Community Bank and Trust
First Community Bank and Trust is a privately owned bank. Established in 1916 First Community Bank and Trust has been serving Beecher, IL, Peotone, IL and the surrounding communities for over 95 years. Our commitment to providing the best banking products and services is matched only by our outstanding customer service. We offer traditional community banking services, including mortgage, consumer, and commercial lending, as well as state of the art electronic banking services.

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Press Contact:
Steven D. Koehn, VP
First Community Bank and Trust
(708) 946-2246