Planning early for retirement really helps

This was originally published on Monday, April 1, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I want to start to save for retirement, but there are so many different types of retirement plans. I am not sure what plan is best for me and my family, or even how to start. Do you have any advice that can get me started?

Answer: If you have read my past articles, you would know that I have stressed the importance of planning for retirement. The rise in the cost of living and the uncertainty of the future of the government-sponsored Social Security program has forced us to take our retirement plans into our own hands. Having the income to overcome unforeseen hurdles and enjoy retirement is essential.

Before you decide what plan suits you best, think of the following question: How much will I need? I wish there was a simple way to answer this and just throw out a number, but the truth is there’s no set amount. How much you need to retire depends on you and the answers to these two questions:

When do you want to retire? How far away you are from retirement is the biggest factor in choosing a plan. If you are close to retirement, finding a plan or investing in something that is slightly less risky may be wise. If you are further away from retirement, you can certainly take a more risky approach since time is on your side. Also knowing when you want to retire will help you with goal setting.

How much will you need annually? Take a look at your current expenses and think about how your future expenses may look. Are you planning on buying a house, thinking of settling down and having a family, or going back to school? Or will your mortgage be paid off by the time you retire with your kids out of the house and on their own? How do you want to spend your retirement? Traveling or taking up a new hobby?

Don’t forget to take into consideration that advances in health care are extending our life spans. As we age, the need for medical care will rise and so will our medical expenses. Also think about inflation and how it will affect your cost of living.

To maintain your current standard of living, most experts say your annual retirement income should be about 80 percent of your current annual income. If you factor in your return from other investments plus your Social Security benefits, you should be well off. To find out what the value of your social security benefits are, go to

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


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