If all all the big investment firms, insurance companies, banks and all others who profess to offer good advice for our retirement are as good as they claim, then why will four out of five Americans fall short of meeting all of their financial retirement needs unless they improve their savings habits or retire at a later age.
“According to a study by Hewitt Associates, a global human resources consulting and outsourcing services company, employees will need 15.7 times their final pay when factoring in inflation and post retirement medical costs.” The recent market fluctuations are causing great concern about retirement.
There is no secret formula for achieving financial security at retirement, but there are a few things you can do to get on the right “road”. Many small business owners procrastinate as to their retirement readiness. They put all their excess funds back into the business in hope that at some future point there will be enough, in a lump sum, to fund their retirement. It’s not going to happen!
What you can work towards now:
- Get out of debt and stay out of debt: You don’t have to keep the American economy going by buying everything on credit. That includes major appliances, automobiles, and even a vacation home. Our grandparents didn’t spend money they didn’t have; we have to adopt their spending philosophy.
- Plan on retiring later rather then earlier: Unless you have the necessary retirement savings ( see next point) plan on working past your 65th Birthday.
- Know how much you will need to retire: Inflation is going to catch up with us again. Do research on life expectancy for your age group (internet will provide great figures). Unless you know that figure, you are “flying blind” towards your retirement.
- Lock in retirement savings, not investments. Pay yourself first, not only your living expenses, but also an amount necessary to reach your retirement goals. Don’t risk your savings; cash is king. Consider vehicles such as whole life insurance, banks and credit union insured savings accounts. Talk to a fee based financial planner for support and help with outlining your retirement path.
- Develop a family budget. My book on budgeting emphasizes that budgeting is not a one person responsibility in the family; it is the responsibility of the entire family. Teach your children to save and budget.
In addition to the liquid funds necessary for retirement I now advocate having a reserve equal to at least two years of gross income in a separate account.
“If you find yourself in a hole, the first thing to do is stop digging”
Have a great day!