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Chapter 5. Developing Your Retirement Pl... > Eight Steps to Financial Independenc... - Pg. 50

Developing Your Retirement Plan 50 John is 36 years old and single. He has worked with his current employer for six years. He contrib- utes 6 percent of his pay to the 401(k) plan and has a 401(k) account balance of $42,000. He's also accumulated $15,000 in his IRA and has another $16,000 in other retirement savings. John will also receive a pension of $1,200 per year from a former employer, beginning at age 62 (see Steps One and Two in the following sections). As of today, John has no idea if he can achieve his retirement goal based on his current savings strategy. In other words, will his vested pension benefit from his last employer, his current 401(k), Social Security, and his personal resources get him to his goal? John also wants to make certain that he does not lose buying power during the years he is retired. And he wants his retirement savings to be large enough to cover any medical expenses he might have after he stops working. Let's find out where he is headed! Step One: Determine the Impact of Social Security and Pension on Your Retirement Goal We start with Figure 5.1 by putting our Annual Retirement Income Goal amount in box A. Next we subtract any income we are reasonably confident we will receive when we have retired, in box B. This includes any pension income you expect to receive from your current employer. (Don't include pension benefits you are due from a former employer in this box. We'll deal with that later.)