#5. No Matter Your Age, Start Today
I get it: no one wants to hear advice like “eat your vegetables” or “never put off what you can do today until tomorrow.” That’s because deep down, we all already know this stuff is true, and it can make us a bit uncomfortable. With that caveat, here I go: start planning today.
Way too many people wait until their children are grown and have left the nest before they start thinking about retirement. I refer to that time between an empty nest and retirement as “the race to the finish line.” That’s one approach. However, demographic and lifestyle shifts are making that race shorter and harder to finish.
Baby boomers who married and had a family later in life have a huge challenge if they wait until their kids finish college to make a plan. My youngest son, who is a baby boomer, probably won’t have an empty nest until he is 60. Getting out of debt is the first step most folks go through in retirement planning. For many that can take three to five years. Then they can begin to save and accumulate capital. If you wait until age 60 to start that process, you are way behind.
While many employers offer 401(k) plans or other tax-deferred retirement options, they are voluntary. In a recent article, I noted an Employee Benefit Research Institute (EBRI) study reporting that only 10% of eligible workers are making the maximum contributions to their employer-sponsored retirement plans. Of the 90% who are not, most said they needed that money to pay their bills… today. Too many of today’s seniors lament not taking advantage of those options while they were still working. A few extra dollars a week adds up to a lot of money over the course of 15-20 years.
Every financial planner—and common sense—will tell you that those who plan early fare better during retirement. Those who don’t are often surprised when they run the numbers and come up short of what they’ll need to retire. For these folks, the next question is, “What can I do to get on track?” The sooner that process starts, the better the results. (Here’s a look at how much it really takes to retire.)
There are too many 80-somethings working because they have to, not because they want to. As one financial planner said to me, “I have never had a single client complain to me that they started their retirement planning too early or saved too much money.”
If I Could Wave My Magic Wand…
I would tell my peers to wake up before it is too late. I would make sure they started accumulating real wealth as early as possible. This means taking a hard look at income and expenses, looking at how much they are saving now, and finding ways to save more. Then the fun part comes when you watch the balance on your retirement accounts go up and up.
Let’s face it, folks: if we make it to 65, statistically there is a good chance we’ll live for at least twenty more years. Retiring comfortably means having the time to do the things we enjoy without worrying about money. An educated retiree with a good plan is not only a good personal pension fund manager, but will also have plenty of time left over to enjoy the fun stuff.
Whether you’re retired now or years away you’ve no doubt noticed there are forces working against us. I don’t mean sinister forces in a conspiracy—though sometimes it sure feels like it—but challenges that we’re facing that, quite frankly, previous generations did not.
For example, we have a government on a spending binge like the world has never seen, and the only way out of it is going to be higher taxes and higher inflation.
Social Security never really kept pace with inflation, and with recent COLAs near or at zero the future looks just as grim, and those relying on it can expect a diminished retirement.
Then of course, the Fed’s near-zero interest rate policy has forced us into investments that are riskier than we might not have considered just five or so years ago.
But there is good news, I promise. I’ve enlisted some of the top experts to help us sort this matter out and give us real life, actionable ideas.