Examples of How Retirement Plans Can Work - I

In order to understand these plans and to help you see how they may fit into your retirement planning needs, here are three examples of how these plans worked for some people we know. 

Rose and Dick

Rose and Dick lived a modest lifestyle in a rented apartment during their lives. Rose did not enter the workforce until she was 51. Even though she worked for low wages in a state agency, she was covered by a pension plan, an employer-paid retirement health care program and 

Medicare at retirement.

Dick ran a very small business. He did not have a formal pension plan, but managed to build a nest egg by investing in the stock market. He did not have health insurance when he retired, but was covered by Social Security and Medicare.

They both retired when Rose was age 66. Their retirement income was not much, but with Rose’s pension, coupled with the income from Dick’s investments and their Social Security benefits, they managed to live somewhat comfortably.

Rose was not always in good health during her retirement. Nearly all of her health care costs were covered by Medicare or her employer-provided health care program. 

Susan

Susan, age 42 and unmarried, has worked in retail since she graduated from college many years ago. Her current employer of six years, a good-sized department store chain, provides her with a 401(k) plan. Her previous employers did not. However, during the years she was not covered by a 401(k) plan, she set aside money in an IRA account, and she continues her retirement savings by setting aside as much as she can in her 401(k) plan.

As a participant in her employer’s 401(k) plan, she contributes enough to earn the employer’s match (dollar for dollar up to six percent of her pay) and she tries to save beyond that amount. 

She also chooses the way her funds are invested within the plan. Few employees focus on how to invest their money to meet a certain retirement income goal. Susan is making the best of her situation, and will be far better off than her colleagues who aren’t saving anything.