Retirement Planning Ideas and Pension Discussion

I read an article last month, and I will post the link if I can find it again, but it said that less than half of all American adults have at least $10,000 saved for retirement.  That means that 50% of American families are not even close to being eligible for retirement.  Now I know these numbers can be skewed in one direction or another, but the idea of "retirement" is one that will haunt the generations to come.

Will I have enough to retire?  With the average life expectancy increasing, how will that effect my retirement planning?  Do I need to save $500K, $1mil, $2mil+?  Will my pension go away like so many others we have seen over the past few decades?  I thought my home would be my source of retirement, but I currently owe more than its worth and I'm already 60 years old, what should I do?

There is no simple answer for everyone.  Let's face it, some people like lavish lifestyles, and others don't mind living in a tent :-)  The first decade of 2000 gave American's, and the rest of the world for that matter, a unique perspective of both economic booms and economic depressions.  With that said, most adults that lived through these trying years have already realized that something needs to change if they are going to retire in their lifetime.

The younger generations, those with 30+ years left of working before they reach retirement ages, will have plenty of time to start saving and planning for retirement.  Doesn't mean they will all follow a strict "save 20% of the paycheck" philosophy, but we are most likely going to see a change in the type of jobs people choose and locations to live as younger generations try to apply these new life lessons.  "We've seen our parents lose their retirements, their home equity, and their jobs... how can I avoid all of that happening to me when I'm there age."  These are questions I ask myself all of the time, and I can sense a quiet movement in my generation to avoid these same results.

One thing facing millions of workers, is the threat of bankrupt pension funds.  The trend suggests that pension funds are a thing of the past.  In the coming years, we are likely to see more state and federal pension funds come under pressure to change as the funds struggle to meet payments to retirees, who are naturally living longer than normal.  I fear some government employees, and possibly even military veterans in later decades, will face some kind of decrease in retirement benefits as these funds continue to come under pressure and scrutiny from financial experts.  I think it is absolutely wrong to promise any individual a defined retirement benefit, have them give up 20-30+ years of service only to take some or all of  that away in the end.  It's sad, it's wrong, and unfortunately we are going to see more of this in the future.

Jake's Simple Advice:

• My only simple advice is to SAVE, SAVE, SAVE!  At least 20% of your income per year.


• Live within your means and find ways to cut out lavish expenses.


• Don't invest in real estate where your mortgage is more than what your rent would be.


• Understand the "Time Value of Money" (TMV) & how it will affect your retirement (i.e. $1 in 1950 is not the same as $1 in 2000).


• Talk to a financial advisor, and setup your own retirement funds (i.e. ROTH IRA, Traditional, SEP etc.)  Do not expect your employer or government to take care of you.


• Vehicles are depreciating assets, don't buy luxury brands for the image value, it only loses value.


• Set a monthly budget, adjust quarterly, but stick to that budget.  Here's a simple method to stay on track, if your budget is $5,000 per month of expenses (rent, mortgage, food, dining out, gifts etc.), deposit $5,000 into your operating account on the 1st of the month.  You can have all of your income deposited into a savings/money market account, and make 1 transfer per month, regardless of how much you make.  If you make $10K/month, but your budget is $5K per month, then you save $5K per month!  Stay committed, stay dedicated, & stay on track.


• Figure out what you can live off of, and avoid increasing that amount year-after-year.  A 10% pay increase should not equate to 10% more to spend on "stuff."


• Take advantage of interest NOW!  If you have large amounts of money in a savings account, say $10K+, you need to move money around, especially if you are only getting 0-2% interest.  Remember, TMV, inflation averages 3% per year over the long-haul, which means you are already losing money at 2%.  Get yourself some CD's, Money Market Accounts, Mutual Funds etc.  Talk to your financial advisor.