Retirement for the Ages

In preparing for a speech for a group of retirees, I ran across some interesting research. American’s, on average, owe $53,000 and have only $1,500 in savings. A recent US Today article cited research indicating that almost 50% of Americans age 55 and older have never calculated how much money they need for retirement! Wake up folks! If you are counting on Social Security and a small 401-k plan to fund a nice retirement for you, you are in for a rude awakening! The recent bear market destroyed a lot of personal wealth. Combine this with the 2000-2002 bear market and stock market returns have been negative for the decade. But it’s not too late. Start now doing everything right and you can create a nice retirement for yourself. 

If you’re in your 20’s or 30’s. I was recently interviewed for a magazine article and a young lady in her early twenties called to fact-check my comments. She was interested in learning what she needed to do to become financially free. She asked, “How much of my paycheck do I need to be saving?” “Should I be saving from my gross or net paycheck?” What I liked most was that she was asking the right questions and I could tell she meant business. My response was that if you’re not investing at least 10% of your gross income, you’re not on the path to financial freedom. 20% would be a lot better and, since she was single, it would be a lot easier to establish the habit now. If she could maintain this habit of saving once she married and started her family, well…she could expect to be financially free by her 50’s. For those in their 30’s who are just getting started saving, 15% of gross income is the minimum required amount for retirement planning. For investments, I directed her to my book, The Complete Idiot’s Guide to Getting Rich which outlines a no-load index mutual fund strategy that is predominately domestic and international stocks based on her young age and years until retirement.
If you’re in your 40’s or 50’s. Before you know it, retirement will be upon you and it’s very important that you begin planning your strategy now. First, you need to figure out ‘the number’. How much money do you need to accumulate, over and above Social Security or company pension, in order to have the retirement lifestyle you desire. Go, right now to the Resource Center at; click on ‘Links’; then ‘Retirement Planning Calculator’ and do a quick analysis of your ‘number’. The number will likely shock you and force you to begin thinking ‘outside the box’. You’ll need to consider taking aggressive action in the form of converting expenses into savings; investing more aggressively; and consider developing a second income. The most important thing is that you understand the challenge you face and that you begin immediately taking action that moves you in the right direction. In a later column, I’ll discuss ways you can create a second source of income without having to work a second job.
Those of you in your 60’s face special challenges and I’ll devote next week’s column to retirement solutions for you.