Wednesday, December 5, 2012

Take Charge of Your Retirement Planning ... Don't Bet on the Government or Your Employer Doing it for You

That as a nation of individuals we're underinvested in providing for our future retirement benefits is a complete understatement, as you realize.

Even worse, we're inclined to not even want to discuss the problem, at least in any depth. Perhaps we avoid talking candidly about it because it's something we feel helpless to do anything about.

However, we also recognize that something has to give, and that these future retirement "promises" may or may not be something we'll actually receive.

Now my purpose herein isn't to say that Social Security and Medicare won't be there in the future. Some form of them will be, for certain. And for those Americans currently 55 and above, my best guess is that nothing will change. Those promises will be kept. Our children and grandchildren will have to pay for them, however, and the reality of putting that burden on them should concern all of us.

Who we're addressing herein are the future generations of retirees and the current workforce under age 55, as well as today's students. In other words, the problem centers around the absolute unsustainability of these existing retirement programs. These programs in the future will be taking on the role of 'supplements' rather than serving as the sole providers of total retiree benefits.

Thus, both individually and as a nation we must develop the habit of saving  and learn how to properly invest those savings. We need to educate ourselves about the basics of saving and investing. And that's because life will be a whole lot less stressful and enjoyable if we get serious about our financial retirement security and take the simple steps necessary to achieve it.

First and foremost, the situation isn't hopeless. Second, for those under age 55, we must choose to face the issue squarely, including the possibility that the Social Security and pension plan benefits we're expecting may in fact be less than what we think they'll be. And for those over 55, we still must educate ourselves about the rewards of saving, investing and not overspending.

This whole issue is a most timely and important one. So let's get on top of it.

 Spanish Retirees to Get No Inflation Adjustment is a great place to begin:

"The Spanish government, struggling to meet budget-reduction targets, announced it won't raise pensions to adjust for this year's inflation, a decision that will hurt not only millions of retirees but also their unemployed offspring who depend on them.

"It has been a very difficult decision, a very painful decision," Labor Minister Fátima Báñez told journalists after the government's weekly cabinet meeting. But, Ms. Báñez said, the government had no option. "The country's priority must be complying with budget targets," she said.

Spain is under intense pressure from the European Union and financial markets to lower a budget deficit that stood at nearly 9% of gross domestic product in 2011 to 6.3% of GDP in 2012....

Friday's decision overrides a Spanish regulation that requires the government to compensate pensioners for any difference between the country's inflation rate and their scheduled pensions increase."
Now that I have your attention, we'll discuss how we will avoid a Spain like unhappy ending down the road.

Let's turn to What 30 years of 401(k) mistakes teach us:

"401(k) plans have . . . become the single largest financial asset most average working class Americans will ever have, and, they're the most mismanaged. Although there have been dozens of mistakes, here are (some) critical mistakes we've all made and what can be done to reinvent these savings vehicles, to create a new generation of Americans who can be properly prepared for their long awaited retirement years.

We Americans are great spenders and terrible savers. . . . most Americans have virtually given up worrying about what their retirement futures hold for them, the problem of being poorly prepared for retirement is just too grim. . . .

Most of us should be deferring/saving between 10% and 15% of earnings to be able to retire and live on 75%-80% of the income we were earning when we turned 65. . . .

I'm a big fan of you learning everything you can about saving and investing, you then don't have to pay a broker 1% commission off the top to get his/her "assistance." You are also less likely to be sold products or services that may not be in your financial best interest if you did the homework yourself! Have you ever noticed how many celebrities or millionaire professional athletes end up declaring bankruptcy?

We need to realize that our Government cannot solve this crisis of retirement readiness.

With increased stress being placed every year on the Social Security system, we will likely see some sort of change for future retirees, that's just a reality. . . . The fact is, 401(k) plans work just fine if they are managed properly and Americans participate sufficiently.

Solution: If you're a participant in a 401(k) plan, make sure you're saving enough to be 100% prepared, in other words, to be "retirement ready.". . . I encourage everyone I speak with to become the champion of their own "retirement readiness." Don't wait another month!

You cannot rely on government for a confident retirement and you must learn how to make saving for retirement the most important aspect of your financial life."

Summing Up

There's a whole bunch of good advice in those comments.

Because in the end, we truly are the ones responsible for our own and our family's financial health and well being.

And long before the day arrives when our time at the workplace has ended, the reality of having adequate financial assets for our retirement years will be staring at us.

We can look at that reality and smile if during our working lives we have saved and invested enough to provide for a comfortable retirement.

And then if the government, aka our kids and grandkids, isn't forced to partially pull the rug out from under us due to "insufficient funds," that will be even better.

But even if all the prior promises from others, including government, can't be fulfilled, we will have taken the necessary steps to provide financial security for ourselves and our families.

That's my take.

Thanks. Bob.

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