You Are On Your Own When It Comes To Retirement

Saturday, June 16, 2012, 2:00 AM | 2 Comments

We all know the days of company’s pension and retiree health benefits are increasingly diminishing to the point that, one day, the next generation will read only stories about them in finance textbooks. To cut down on expenses, it has become the age of do-it-yourself in almost all aspects of your life. Don’t expect your employer to help you when it comes to retirement.

These days working in retirement – part time or second career – has become the norm. It used to be when your father or grandfather retired, their home mortgage would be paid off.

Along with Social Security monthly check, they had company’s pension plan plus their own savings.

They could gladly look forward to their retirement days. It brought may be not great wealth but comfortable living. Folks did better in retirement back then.

Prior to the 1970s, 401(k) and IRA and other self-saving accounts were non existent. Today these types of accounts are the only way to hope for a comfortable retirement.

It’s time to take retirement in your own hands…

As I see it, retirement meant you had contributed all your working life to the society in your hard work and spending cautiously to lift the economy up. Then it was time to live financially worry-free life in retirement.

Like I said, it’s different now. Forget about retiring. It’s more like work, work, work and never quit working.

It seems the only time to quit working is when you are six feet under.

You must start saving for retirement. Saving nothing and that’s exactly you would have when you retire – nothing.

In the words of George Costanza, your retirement would be a show about Nothing.

 

Federal Reserve’s survey says…

According to the Federal Reserve’s 2007 Survey of Consumer Finances, half the people closer to retirement (ages 55 to 64) had a retirement account balance of less than $100,000.

At a typical draw-down rate of about 4 percent per year, that equals about $4,000 annually, or about $333 a month in retirement income.

It’s extremely hard to live on $333 a month now while you are able to work longer and extra hours as well.

How do you expect to live on it in your retirement when you may not be able to work at all?

And why should you work in retirement in the first place?

Also consider the fact that Social Security has its own problems. Unless Congress wakes up and does something positive about it, you cannot completely depend to live on it.

Steps you can take towards your retirement saving…

The best you can do for your life in retirement is…

• Start saving early…

  One way to beat the odds is to start saving early for your retirement. You would have more time to make regular contributions.

  In addition, we all should realize that slow-and-steady growth and diversification are often most effective over the long haul.

  If you cannot contribute the maximum allowed into your 401(k), then contribute enough that you get matching contribution from your employer. That is free money. Take advantage of it.

• Avoid making two big mistakes…

  Two of the biggest mistakes employees make are:

  1. After a job change, cashing out the 401(k)
  2. Leaving an employer’s matching dollars on the table

• You can withdraw money from certain retirement accounts before its time…

  Some surveys show that many folks don’t contribute to any kind of retirement because they are simply afraid they won’t be able to withdraw money without paying taxes and / or penalties.

  Some experts say the idea that retirement savings is locked up for a far-flung future date is a mental block for a lot of potential savers. It doesn’t have to be.

  Roth IRA is one retirement account you can withdraw any money you contribute at any time without taxes or penalties.

  Let’s say you make $5,000 contribution to a Roth IRA. You have immediate access to that money. So if you need it, it’s there. But if you don’t, it grows tax-free.

• Saving for Healthcare

  Saving for retirement is not just contributing to the traditional retirements accounts. Healthcare must be a part of your total retirement strategy.

  According to a 2010 study by the Center for Retirement Research at Boston College, after the age of 65, the average couple will spend about $260,000 (which many retirees won’t have) out of pocket on health care.

  Find A Good Financial Adviser. See how the adviser may be able to help you.

• Delay your retirement and work longer…

  It’s simple as that. Let’s face it. Many of us have to delay retirement and continue working to save more.

  Experts say if you find something that gives you joy and more money, stick with it. Continue working at it.

• Start a small business…

  Don’t hesitate to start a small profitable business. It may be best to start the business in which you have the most experience at work. You already know the ins and outs of the business.

In a Nutshell
The do-it-yourself days are in. Company pension is out. Get ready for the new finances. You and only you are responsible for your own retirement.

You can’t depend on others “no more.”

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