Financial planning for your future is something you should not put off. No matter whether you are in your twenties or your fifties, you should have a plan in place that will allow you to retire in comfort.  Most experts agree that to maintain the same level of lifestyle you had while you were working, you will need about 70 of your current working income. That is not a hard and fast rule, but it is a good starting point.

HOW MUCH DO I NEED TO RETIRE?

When you reach 65 or the age when you want to retire, you should have enough savings and investments to generate a steady stream of income for the remainder of your life. Certain things change when you get older. Some of your expenses will go down and others are likely to increase. For instance, many people will no longer have a mortgage on their home and that is a major expense that will go down. You also will probably drive less and use less gas as you do not have to commute to work 5 days per week.

On the other hand, as you get older, you may find yourself spending more money on medical care. If you are like most Americans, you will have to take some prescription drugs, visit doctors on a more regular basis and probably spend some time in a hospital. Medical costs can add up quickly, especially if you do not have adequate insurance coverage.

In order to have enough money to maintain the lifestyle you are accustomed to living, you should consider investing in a tax-advantaged retirement account. A regular IRA, or a more preferably, a Roth IRA, can help you build up substantial assets for retirement. The earlier you start, the more likely you will be able to reach your targeted savings goal.

The advantage of a Roth IRA over a traditional IRA has to do with the treatment of tax liabilities. When you contribute to a Roth IRA, you make your contributions with after-tax monies. Your investments then grow tax-free and when it comes time to withdraw your money, you can take it out and not have to pay any taxes on either your original contribution or the amount that the IRA appreciated over the years.

Everything depends on the type of return you can expect to earn on your savings. Suppose you need 50,000 per year to live a comfortable lifestyle when you retire. Further, assume that you will get 20,000 per year in Social Security. In order to guarantee the remaining 30,000, you would need to have approximately 600,000 at a 5 tax free rate of return. There are many ways to invest using an IRA to make sure you will have sufficient income.

Many IRA investments can also be set up as an annuity that will provide you with a guaranteed stream of income. Always try to save more than you actually will need, because things come up and circumstances never stay the same. The key to a comfortable retirement is long-term planning, smart investing and sometimes, just a little bit of luck.