How Will You Survive After Retirement? Planning For A Secure Financial Future!
Dear Family,
Sat Nam. Greetings from Espanola, New Mexico.
What will your life be like when you retire and are no longer able to work? This letter offers a response to that question, detailing a program for financial security when you reach retirement age.
Many people who reach retirement age today find themselves totally unprepared financially. They are forced to continue working, rely on others for support, or live an impoverished lifestyle. To expect that Social Security benefits and / or company provided retirement plans will meet your financial needs after retirement is no longer valid or sound thinking.
Social Security turned 60 in 1995. It has helped millions of Americans in retirement and through times of financial duress, such as death or disability of the family bread winner. But the pool of working Americans who are funding this vast social insurance program is shrinking. When the program started in 1935, 43 working people supported each person receiving benefits; today this ratio has dwindled to 3 to 1.
Retirement planning specialists predict it could take more than one million dollars to retire comfortably in the next century, yet an alarming number of Americans put off saving for retirement falsely believing they will be able to live on their Social Security benefits and company pensions. These will be inadequate to provide even a modest standard of living for retirees. They will have to make up the difference with personal savings and investments, and this takes planning now.
To avoid becoming financially burdened after retirement, even destitute, a plan requiring discipline and, possibly an adjustment of spending patterns will be needed to set aside money each month to provide a reasonable standard of living when retirement becomes a reality.
The two most important financial factors to building a savings and investment fund are time and rate of return. The chart below illustrates the effect of saving $1,000 per year for various periods of time and at different rates of return:
$1,000 Per Year Investment
Cumulative Fund Balance Fund Balance
Year Investment @ 8% Rate of Return @ 10% Rate of Return
1 $1,000. $1,080. $1,100.
10 10,000. 15,645. 17,531.
20 20,000. 49,422. 63,003.
30 30,000. 122,346. 180,943.
40 40,000. 279,781. 486,851.
50 50,000. 619,672. 1,280,299.
60 60,000. 1,353,470. 3,338,298.
It is clear that starting early allows more time for compounding to occur and provides a larger fund. As you can see, a small increase (2%) in the Rate of Return generates a large increase in the fund.
It is also apparent that parents can provide their children with a great gift if they start saving plans for them at an early age and teach them the principle and discipline of saving and investing for the long term.
Taxes play an important role in the savings and investment process, because taxes effectively reduce the rate of return earned by the invested assets. Example: if an investor is receiving $80 income on a $1,000 investment and has to pay taxes equal to 25% of income earned, the effective rate of return on the investment is only $60 ($80 less $20 of taxes). The taxes in this case reduce the rate of return from 8% to 6%. If investments can be made on a tax deferred or better yet tax free basis, the effective rate of return is substantially increased.
The Guru Amar Das Plan (GAD Plan) provides a tool which young and old may use to start a savings and investment fund. Contributions to the GAD Plan are income tax deductible, the income earned by the fund is tax free, and distributions from the plan can be income tax free.
Time is the key to successfully accumulating a savings and investment fund. Start now and develop a rigorous discipline to set money aside each month so that your future prosperity is secure.
Remember the story book tale of the grasshopper who fiddled and played all summer long and made fun of the ants who worked all summer to stock up for the winter -- he did not even survive! Or as our Teacher says, "The time is now, and now is the time."
Future prosperity should be and can be yours. Begin your planning by getting more information and asking your specific questions about the Guru Amar Das Plan, and how it can best serve your needs. You’ll also learn that as you create your future wealth, you will help fund the programs of the Dharma.
We look forward to hearing from you.
Humbly yours,
Guru Amar Das Team
Sikh Dharma Development
Tel: (505) 753-5881
Fax: (505) 753-5982