The average entry age of new hires among members of MOSERS is 34.7, and the average entry salary for new hires is $25,3061. Whether you fit into those categories or not, it's easy to see that MOSERS members need to plan carefully to make the most of their earnings. Retirement still seems to be a glimmer in the distant future, as other life events take center stage. Your career is in full swing and you may be starting or continuing the growth of your family. Your child may be the immediate focus of your day, and your future planning. How does your future retirement get any attention?
Taking advantage of MO$T
Carefully setting aside money to pay for your child's education now may help you in your retirement years. Anticipating and preparing for future college expenses will allow you to leave your retirement nest egg alone when digging deep in your pockets for your college-bound child. Separating funds is a great way to make sure you have enough money for all your future expenses, especially if your child's college years will coincide with your retirement. The Missouri Savings for Tuition Program (MO$T) can help you with this tricky task.
MO$T assists Missouri families with saving for higher education. When you open a MO$T account, the amount you contribute each year (up to $8,000) can be deducted from your Missouri State taxable income. Any investment earnings on your contributed money will accumulate on a federal and state tax-free basis. Your account is opened on behalf of a designated beneficiary (your child). When your child is ready to go to college, withdrawals may be made for higher education expenses at eligible schools. These withdrawals will be federal and state tax-free. The MO$T program is easy and affordable. Contributions can be made through electronic funds transfer, or by payroll deduction. The minimum contribution is $30 per account each month. For more information on opening an account or your options with MO$T, logon to their website at www.missourimost.org.
How Much Money Will You Need in Retirement?
Once you have set up a specific plan to save for your child(ren)'s college education, you can tend to your retirement nest egg. While MOSERS will provide you with a lifetime benefit (if you're vested), and social security will be in your reach as early as age 62, these two sources may not add up to your desired monthly income in retirement. The third source will be up to you and your personal savings plan. To determine how much you might need in retirement, consider the following:
Life Expectancy
+ Personal Health
+ Lifestyle
+ Status of Dependents
+ Inflation
________________________
= Your Retirement Needs
Life Expectancy: The average person lives 25-35 years into retirement. Take this into consideration when determining your overall monetary needs. Your funds may need to last longer than you had previously anticipated.
Your Personal Health: The cost of long-term care, prescription drugs and other treatments or hospital expenses not covered by Medicare add up quickly. Take a look at potential expenses that may come your way given any medical conditions you currently have or any forseeable future problems.
Lifestyle: Your current income, hobbies, and activities are a good indication of what you will need for your retirement years. Chances are, you will need more money to support your retired lifestyle than you may think you will need. You'll have more time to spend on chosen activities, travel, and hobbies, which add up quickly.
Status of Dependents: Will you have financially dependent children or parents when you are retired? Planning ahead to account for such expenses will help you prepare to divide money between your live-in child(ren) or parent(s) and your retirement activities.
Inflation: Don't forget this key component! Inflation has averaged 3-4% each year over the last 25 years. For example. $10,000 today, after 4% annual inflation, will be worth $6,756 in 10 years, $4,564 in 20 years and $3,083 in 30 years. Unfortunately, this means you'll need to save more now to maintain your expenses in the future.
More Information
For more information on planning for your financial future, attend a MOSERS Money Matters seminars.
1Based on data from MOSERS Member Profile Summary as of June 30, 2005.
Source: MOSERS - PensionsPlus On-Line Newsletter - Fall 2005