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Introduction to Financial Planning

Nowadays, we hear about the baby boomers everyday. The baby boomers are the generation born between World War II and the early 60's. They form the largest American generation, 78 million people or 30.8% of the U.S. population. It is estimated a baby- boomer will turn 50 every 7.5 seconds for the next decade. You might say, what does that have to do with me?

The baby boomer generation includes the parents of most of us. As they begin to retire in the early part of the next century, when we are in our 20s or 30s, they will start collecting Social Security. Such a large number of people would put a tremendous strain on the Social Security system. Many experts have predicted that this will lead to the bankruptcy of the Social Security system around the year 2010. That's a lesson for all of us--we can't rely on the government to provide a financially secure retirement, we have to rely on ourselves.

But retirement is still four, five decades away, we don't need to worry about it yet! Wrong. The fact is, the later you start planning and saving, the more money you will have to save and you will need a higher return on your investments. Starting early requires you to put away small amounts of money consistently, would not affect your lifestyle and leads to more money for retirement than starting late. For example, if you start saving $50 a month at age 25, you can expect to withdraw about $57,000 a year at age 65. But if you start saving at age 35, you would need to save $200 a month for the same result! Check out this chart comparing start savings at various ages and various amounts.

The typical baby boomer is saving only a third of the amount needed to retire in comfort and he or she says they can't save any more. Do you want to be in their shoes? Slow and steady will win the race!