From the first day many people enter the workforce. They dream about the day they don't have to work anymore. retirement, no work. No worries, no problem. As it turns out, however, there is a problem, money. According to the Economic Policy Institute, nearly 50% of Americans have nothing saved for retirement.

As you can see, in this graphic, only 53% of families aged 32 to 61 have some type of retirement savings. Since we're on the topic, what does retirement mean to you? The standard definition is leaving one's job and ceasing to work completely. In my opinion, that definition is a little outdated. It almost implies you need to be old to retire. My definition of retirement is being financially independent, amassing enough wealth to work only when you want to.

Let's talk about how to get there. The earlier you plan, the better chance you have of achieving this goal. Remember, compound interest. That's your retirements. best buddy A lot has changed over the years making retirement planning more important than ever. In the past, jobs offered pensions, which meant you reset for life.

If you worked long enough, life expectancy was shorter in social security was guaranteed. Nowadays pensions are becoming extinct, and it's projected that the social security programs cost will exceed its income by 2020. The timeline for your retirement depends on your needs, your goals during retirement, and other sources of income. For the typical retirement age of 65. a general rule of thumb is to have 12 to 15 times your pre retirement yearly income saved before you retire. For people looking to escape the rat race earlier, a more aggressive approach is necessary. Be sure to read the supplemental article called the 4% rule to learn more.

The key to retirement is knowing your time horizon and starting to invest as early as possible. A good benchmark to use is the capital to income ratio. In case you're wondering, capital is your money. As you follow the timeline, you'll notice that you're expected to gradually increase your wealth until you reach retirement age. At that point, you'd ideally have 12 times more money saved and invested than your pre retirement income. There are plenty of ways to invest for retirement.

It's all about what works best for you. In a traditional 401k, you contribute money before taxes, lowering your taxable income now, and you pay taxes when you withdraw. Also, some companies will match a certain amount of your contributions, so take advantage This is a great option for anyone looking to set up their first retirement account. A Roth 401k is very similar to a traditional 401k but you contribute money after taxes are taken out of your paycheck and your contributions are not taxed when you withdraw. This is an excellent option for anyone who thinks they'll fall into a higher tax bracket in retirement, thus gaining the greatest tax advantage. 403 B has the same characteristics as a 401k.

But it's for teachers, pastors and other employees of tax exempt organizations. For this reason, they have lower administrative costs and 401 K's. A 457 plan is a 401 K plan for government, state and city employees. It offers more flexibility than a 401k. Namely, no penalty for early withdrawal. an IRA is an individual retirement account, you can open one without an employer.

A nice benefit of an IRA is having greater freedom to choose your own investments, helping you diversify and lower fees. Time is money and the decisions you make today will shape your future forever. Interested in learning more? Check out the advanced courses at money master does think ific.com invest in your future today.