Preparing For Retirement
Four factors will determine your success in reaching your financial goals for retirement:

• Your age and how much you have already saved,
• How much you save in the future,
• How much your money earns,
• How long you work.

Your Age And How Much You Have Already Saved
Nothing can be done about your current age and how much you have already saved. No one can turn back the clock! If you already have savings, it should be considered when thinking about your retirement picture. Compass, our unique retirement planning tool, lets you enter how much you already have saved and how it is invested so it can be properly considered in your retirement planning.

How Much You Save In The Future
This area of 401(k) planning is vitally important, yet doesn't receive much attention. We hear a lot about investment returns, day-trading and web interactivity, but little about how much you save. Most experts agree that you need a retirement nest egg of 16 times your annual pay when you retire (not including the discounted present value of Social Security benefits, which will range from 1 to 8 times pay for most people).. In other words, if you are making $100,000 per year when you retire, the accumulated value of your retirement account needs to be 16 x $100,000 = $1,600,000. If you are making $50,000 per year when you retire, the accumulated value of your retirement account needs to be 16 x $50,000 = $800,000.

The chart below shows how much you should have at various ages to accumulate a Retirement benefit equal to 16 times your annual pay at age 65:

So how do you do this? What if you are woefully behind? Here are a few tips:

• If you can't start big, start small. A 25-year-old making $25,000 a year who contributes just 1% of his pay, less than $5.00 per week, to a 401(k) Plan will have $285,000 at age 65. This example assumes a 3% raise in pay each year, a 50¢ company match, and a net annual investment return of 10.75%.
• Increase your contribution each time you get a raise. Tell your employer that you want your 401(k) contribution to go up 1% each time you get a raise.

How Much Your Money Earns
Good investment earnings are a critical component of a successful retirement plan. If our 25 year old who is contributing just 1% of his $25,000 annual salary earns a net return of 8.75% annually instead of 10.75%, he will have $173,000 instead of $285,000 (Almost 40%!). A reduction of two percentage points cuts the retirement benefit nearly in half. Earning adequate investment returns is as crucial to your retirement plan as saving enough.

The internet is full of investment advice. Fool.com gives basic investment advice in easy-to-understand language. ScottBurns.com is another good source of a broad range of advice. Most of the big mutual fund companies have their own websites that offer free advise, as do the money magazines such as Kiplinger's (Kiplinger.com).

What if you don't have time or aren't interested in becoming a financial expert? Our 401(k) Plans include a Professionally Directed Investment (PDI) option. PDI let's you leave the decisions relating to the investment of your 401(k) up to a team of professional investment managers.

How Long You Work
People entering the workforce today will probably not retire at age 65. As life expectancies continue to increase, we will work longer and longer. Working a few more years can have a dramatic impact on our savings. Our 25-year-old who is contributing just 1% of his $25,000 annual salary and would have $300,000 at age 65 would have $413,000 if he worked until age 68! Working a few years longer may be a way to offset getting a late start in savings.