So , what do you consider your biggest “purchase” over a lifetime? And how will you pay for it? For some folks the biggest purchase is a home, paid for with a mortgage, and pretty much dependent on your credit score for your interest rate. For others, it might be a car -once again, usually bought with a loan, and making payments. Or maybe your education, or that of your children. Here’s one most people usually don’t think about until they are in their forties or fifties – which is a HUGE mistake… RETIREMENT!
Retirement? “What? I’m way too young to be thinking about retirement. ” (Umm, you are never too young.) “Oh, I’ll just survive on Social Security.” (Really, have you looked at how much you will receive, if it is still available? Are you going to live in a cardboard condo and dine at Chez Soupline?) “Oh, why plan for the future if I am not even sure that I have one?” (Sad, fatalist attitude, maybe?) “Oh, I’ll just wait until the kids finish college.” (Umm, what if they come home to live? And do you really think its a good idea to put off savings for retirement for 18 – 30 plus years? And considering that the years that you are raising your family are ostensibly your “peak earning years”?)
The truth is according to the 2010 Employee Benefit Research Institute’s 2010 Retirement Confidence Survey, 43 percent of Americans have less than $10,000 in their retirement savings accounts. And 27% have less than $1,000. Not quite enough for that comfortable cabana in the Caribbean.
Okay, you need to ask yourself a few questions. NOW. Not when you are getting ready for the gold watch. Or the boot in the pants, or whatever your particular employer is planning for your retirement party…
- Where will I live?
- What are my living expenses now, and will they go up?
- What will I do with all my spare time, and what will that cost?
- Will I need a part time job?
- Will I WANT a part time job?
- What about health insurance?
- Does anyone really believe that the cost of living will go down?
These questions don’t even scratch the surface, but you get the idea.
If you’d like to know how much you need to save for retirement, there’s a lot of helpful information over at AARP, formerly the American Association of Retired Persons. I’d start at the Retirement Calculator . I mean – seriously, who knows more about retirement than AARP? If you don’t like their calculator, just Google “retirement calculator” and knock yourself out. There’s a ton of them.
How much will you need to save per year? That depends on when you start. Here’s some good news if you have put it off for too long… If you are over age 50, then the IRS allows you to save a little bit more, tax free in what they call a “catch -up” provision. I’m not an expert in these matters, but I am sure you can find that info over at AARP.
Some folks will forego their retirement savings and planning, and instead spend more on their family and children – “sacrificing” for their entire lives. As noble as this appears, it is really counterproductive. Who is going to help pay for the parents when they get older if they don’t have the money? Is that really “sacrificing” and taking care of your family? Would that 2 week vacation be all that different if you only took a week, and put the rest of the funds in your retirement account?
The excuses are many, but you really need to make an effort to keep adding to your nest egg. Do a little math, and don’t just throw a few coins in the cookie jar for a rainy day. Make it a priority that gains importance as you get older.