Planning Your Long-Term Financial Needs
According to results of a Bankrate survey, released this year (2018), nearly 20% of Americans are not saving for retirement and 47% are saving less than the recommended amount (10-15%) despite talk of an impending downturn in the economy.
It’s often portrayed that the odds are stacked against anyone looking to secure their future. After all, wages have been stagnant. Pensions have disappeared. And social security is projected to be unsustainable by 2034, leaving many without this once common resource.
If self-sufficiency and comfort is the goal, most households will need to save nearly 1 million dollars or more, depending on their desired lifestyle. That’s the equivalent of $50,000 a year for twenty years or almost $34,000 a year for thirty years. While many advisors often say to base savings off the average retirement age of 67 and the life expectancy of 87 years old, in the case of retirement funds, it’s always best to save more than needed.
It’s a daunting task, for most, to need to save a million dollars, especially if they still have children in school or debt to repay. A large percentage of the population who have reached the time of retirement have decided to work longer before retiring or to work part-time through retirement in order to make ends meet. Rather than simply accept the thought that you’ll just have to work past the typical retirement age, please consider the following suggestions:
- Start NOW! If you have not started to put money away for retirement, do something today. Even if it’s $5 a month into a standard savings account, set up an automated transfer. Later, increase the monthly contributions.
- Pay Yourself! As you pay off any debts you currently owe, take those same monthly payments and pay yourself. For example, once you pay off a credit card debt that is currently requiring a $250 monthly payment, begin putting that $250 each month into your savings plan.
- Remember Inflation and Taxes! Annual inflation averages a little over 3%, and most all of us have to pay some sort of income or investment tax. Combined, they can easily average about 4.5% annually. That means that just to break even, our investments need to return at least 4.5%. Putting your money into Certificates of Deposits or savings accounts may seem to be a “safe” investing strategy, but you’re also all but guaranteed to lose value in your investments EVERY year. True investing in a balanced stock portfolio may be the only way to stay ahead of inflation.
- Find a trusted advisor. Financial planners are not just for “the rich.” Ask around for referrals. Ask someone you admire if they have a planner they respect. Find someone with experience, a track record of success, and someone who wants to build a long-term relationship of regular financial counseling, not just someone trying to sell an insurance policy. Then, research their fee structure and ensure the costs don’t outweigh the benefits.
Trusting that your financial future will take care of itself is not a financial plan. Take time, ask around, and do some research. You’ll find that investing in yourself (your future) will pay undreamed of dividends for years to come.
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