Do You Really Need to Save for Retirement?

YES, you do need to save for retirement and YES you should start now.

Even if you are only 25, and your friends think you are nuts to be talking retirement planning, you should feel secure in the knowledge that you will be like the little pig who built his house of bricks and withstood the gale force winds and the wolf at the door.

There is nothing wrong with being prepared.

If you still need to be convinced, consider this:

You will need 60 to 80% of the income you are earning before you retire, in order to live comfortably.

While you will not have the same expenses you might have when you go to work, you WILL have expenses and these will include higher health care expenses as you age. And what if you take up a new hobby or want to travel or buy gifts for grandchildren?

All things considered, if you were spending $7,000 a month while you were working, you will probably spend just about the same amount after you retire.

What does that mean?

It means that if you live 25-30 years after you retire (and that is probable with longer life expectancies), you will need one to two million dollars during that time to maintain your lifestyle and spending habits.

Perhaps you think you don’t have to worry about saving for retirement because your company will take care of your retirement needs.

Consider that many companies have already reduced or cut pension plans and that some companies have gone bankrupt and no longer pay the pensions they promised employees 30 years ago.

You will probably find that your company is offering a 401(k) but that translates to your having to decide how much you can afford to save and MUST save to get you to where you want to be.

How much can you afford to put in and where do you put your money to reduce risk and leverage growth? Welcome to the world!

Of course your decisions will be based on your age, your income and the number of years you have with a company. If you are in the forty-something category, you have less time to save than your younger co-workers.

If your traditional pension plan was cut in favor of a 401(k) and you lost a large percent of what you had counted on for retirement, you have to make up for that now in your forties.

That means you have to be aggressive in investing in your 401(k) – probably to the tune of 12%-13% of your income, so you can ‘buy back’ the amount you lost.

To make matters worse, the decrease in salaries since 2001, means that many families can no longer afford to save anything because they pre-tax income is lower.

And many employers are no longer offering retirement plans, so families are left to fend for themselves.

When this happens, most people find the process too complex and they simply do nothing.

In 2003, a study by the Federal government revealed that people in the work force (between the ages of 55 and 64) had an AVERAGE of $60,000 in their retirement account at the time of the survey.

How long do you think that will last when those people retire?

As employers shift the burden of retirement saving and planning to employees, each individual is left to sort out the options and plan for his/her own future and most are overwhelmed by the responsibility and the choices.

While the government squabbles over provisions for the Baby Boomer generation, you and your co-workers must plan your own future.

You cannot wait for someone else to take care of you!

Though every statistic seems to suggest that planning for your retirement should be a top priority, surveys reveal that only 42% of U.S. employees have even STARTED to plan.
Furthermore, these surveys reveal that most of us are clueless about how much we will need when we retire and about whether our pension, 401(k) and/or Social Security are dependable and robust enough to support us.

The fact is that your generation is going to have to be more responsible for your own retirement planning and savings than the generation before you ever were.