Retirement preparedness is almost never positively portrayed in the media. There is constant fear mongering. They conduct plenty of polls that show that the majority of people are not financially prepared and aren’t taking the correct steps to get themselves to a successful retirement.
Today I’d like to share a different side of the same story. While most people may not be prepared there are some people who are preparing and have a bright future. I am one of them and I hope you’ll join me.
Working Past 65?
There is a lot of talk in the media of people not being able to retire. I’ve heard that more than three in five U.S. workers in their 50s and 60s plan on working past 65. What do you think about this?
There are a lot of people out there that aren’t prepared for retirement. That is a sad fact of the state of retirement today. However, instead of fear mongering and telling everyone how unprepared the general population is I’d rather focus on helping people prepare themselves. It helps if you prepare early but even if you’re closer to retirement there is plenty you can do to make your retirement brighter. It isn’t all fun and games though.
I personally have no doubt I’ll be able to retire by 65, if not earlier. The key to being able to retire is to save aggressively as soon as possible. It doesn’t matter if you’re 20 or 40. If you haven’t started saving for retirement yet start today.
Another key for a successful retirement is the amount you save. Don’t go with the default contribution percentage about set up by your company. Chances are they either don’t auto enroll you or opt for small amount such as 3% which is not enough. You’ll never be able to retire at that rate. Instead try 15% or more.
American’s Average Retirement Account Balances
In one survey only 17% of people had more than $250,000 saved up for retirement in 2011 and 60% from the same survey reported having saved less than $50,000 for retirement. It seems people aren’t saving enough for retirement. How does that affect you?
Retirement has changed significantly over time. Originally people lived much shorter lives and had defined benefit pensions from working at a single employer for most of their lives. The responsibility of saving for retirement has transferred to individuals today and that is what makes these numbers scary.
The problem is these people aren’t you or me. We can take responsibility and save enough money even if others aren’t. How much other people have saved doesn’t affect me and how much I save. It shouldn’t affect you either.
I personally am not worried. I’ll have enough money when I’m ready to retire. I started saving in my 20’s and have saved an aggressive percentage of my income. In fact, I save over 20% of my income for retirement and I plan to save more as my income increases and our debt is paid off. The more you save the less money you spend and that will lower the amount of money needed for retirement.
Stock Market Returns
I read in an article that stocks have earned slightly more than 2% a year in the past decade, while the average annual return of the Standard & Poor’s 500 Index from 2002 to 2012 has been 1.8%. This isn’t the average 8% stock market return everyone quotes in their calculators. Should I be worried?
Once again, this does not worry me. Why? Because I won’t be retiring for decades. What happens in one decade can easily be an anomaly or depend on what happened in the first or last year of the selected time frame. I’m more concerned about the long term returns over multi-decade periods.
In fact, these decades with low returns likely mean that you can pick up more shares for a smaller price than you could during the boom times. Then, when the markets take off again you’ll have even more shares getting those larger returns.
Overall, I’m pretty happy with my current retirement saving set up. I think I’ll be more than ready to retire when I eventually get to my traditional retirement age. The more I increase my savings as a percentage of my income the earlier I’ll be able to retire. Retirement is possible. Don’t let the media get you down.
Does all of the doom and gloom in the media scare you? Remember, they’re talking about the average American and I hope you don’t aspire to be average. I don’t.