Retirement: It’s increasingly on the minds of many Americans, as both Baby Boomers and their children contemplate the life changes that will take place when this population begins to leave the workplace and settle into the retirement years. Over the next 20 years or so, an estimated 10,000 Baby Boomers will be retiring every single day.
It’s not surprising that the earlier people begin to think about retirement incoming planning, the better. Not only does this help people budget for the future, it can also give them the most accurate look at when they can feasibly retire. Without any retirement planning, the gap between when one wants to retire and when one can retire can become quite large.
If you or someone you know is trying to put together a long-term retirement strategy for the future, here are a few important facts to keep in mind.
Don’t Plan Alone
A recent study by Boston College’s Center for Retirement Research discovered that, as a whole, Americans are $6.6 trillion short of what the will need to comfortably retire. While some of this is due to circumstances beyond anyone’s control (poverty, medical problems, unanticipated family issues), some of this can be avoided with better planning. One mistake many individuals make while planning for retirement is budgeting based on the costs of today without factoring in inflation. This leaves out important points—for example, the medical insurance industry’s cost to consumers is expected to grow 5% each year. Working with a wealth management group or (even better) a retirement planning specialist can help ensure a comfortable retirement.
You Don’t Want a Lot of Cash
When it comes to preparing for your retirement, having a ton of cash on hand is pointless, since the “cost” of inflation is higher than the interest rate most people get at the bank. This means your money is actually losing value because your purchasing power goes down every day it sits in a low interest rate account. Money will only grow if it is invested properly--in an IRA, into stocks, and invested some other such way. Money placed in an IRA grows tax deferred, meaning it won’t be taxed until you get ready to withdraw it. During this time, you can invest all that money in everything from stocks to mutual funds to bonds. Having a modest amount of cash on hand and investing the rest can help you avoid becoming one of the 56% of retirees who had outstanding debts upon retirement.
Set up a retirement income planning review today so that you don't need to keep worrying about whether you're adequately prepared for retirement. As many current retirees can attest to, it's coming quicker than you think, and the secret to a comfortable retirement is informed planning and preparation.