Retirement Planning? When?
Have you ever woken-up in middle of the night sweating and wondering, "what will I be doing in retirement?"
"What kind of lifestyle will I have when I retire?"
Worse yet, "I have not planned for retirement, and I am forty going on fifty, I am scared!!!"
The mutual fund industry estimated that it would take at least 70 percent of your pre-retirement income to retire comfortably. Is this estimate etched in stone, like the Ten Commandments?
Of course not! Each person should make an honest and realistic assessment of the amount of money needed for retirement. He or she must take into account what type of lifestyle is wanted in retirement.
For example, in my parent's generation when they needed to make a major purchase such as a new stove/oven, they saved money and bought it. With the Baby Boomers (born between 1946 to 1964), when they needed a new stove/oven, they would buy it and pay it off over time.
The issue is NEED versus WANT. Planning for the future versus mortgaging the future for immediate gratification. Which route would you prefer to take?
No amount of money saved is enough for retirement, if one do not know how to control his/her appetite in wants. Therefore, how much is enough?
The recent statistic from the Federal Reserve shows that families with household heads between 45 to 54 years old have median net worth (difference between assets and liabilities) of $123,684. Whereas, the average net worth for this group is $419,073. The median is probably more representative than the average as income distribution in the United States is heavily skewed towards the top. What does that all mean? That means at least half of the families have less than the median net worth of $123,684. This trend has been accelerating for years. It will only get worse as Baby Boomers are turning 50 at the rate of seven every minute and will continue to do so until 2014, according to American Demographics magazine. The aforementioned statistics literally scared the living-daylights out of me!
What can we learn from the mistakes that the Baby Boomers are making?
For most Baby Boomers, they will not be able to retire in the traditional sense, as they will have to work beyond the normal retirement age of 65 year of age.
Secondly, everyone in this country who is old enough to vote must be convinced that living a less expensive lifestyle is positive rather than negative.
Thirdly, adopt a lifestyle that "living within my means" is better than "living beyond my means." That I am thankful for what I have rather than what I do not have.
Fourthly, it is never too late to change and plan for the future. Today is the first day of your new life!
Finally, put a retirement plan into practice immediately. A competent financial advisor such as a CPA is essential to guide you through drafting a viable retirement plan.
In conclusion, the burden for most individuals in the United States to plan for retirement will increase exponentially as his/her earning capacity decreases with age. Therefore, we must begin to develop the habit of saving money as soon as possible.