As with many things in society today, the concept of retirement planning is changing dramatically from what it was just 20 years ago. With the potential demise of social security in the future and other retirement options not as practical as they once were, there are countless questions about what is the best way to plan for retirement today.
Retirement Planning – Then & Now
In the not so distant past, financial advisors told us to rely on the “3 legged stool” when looking to retirement planning. This included:
• Defined Benefit Pension
• Social Security
You were encouraged never to rely too heavily on one of these 3 legs. But, today two of these three legs, social security and pensions, are not what they once were. And the third leg, savings, is more difficult than ever before. It’s widely reported that the social security may well be in trouble. Pensions have also sharply declined for many people. This require us to re-think how we will plan for retirement.
Retirement Planning Today: What are Your Demographics and Lifestyle?
There is no longer a “one size fits all” approach to retirement planning. How you plan is greatly determined by who you are and how you want to live during retirement.
While life expectancies continue to rise, so do early retirements. These early out’s may be due to health or layoffs. This means you may have a shorter working career and live longer.
Couple that with a generation that doesn’t want to go without much. In years past, retirement frequently equaled a lower income and less ability to live how they had during the working years. Our society has changed so dramatically, many worry they will be unable to maintain their current lifestyle. This can lead to other complicated issues like massive debt if a retiree is not careful.
While social security and pension plans should still be considered an important part of retirement planning, more emphasis should be placed on personal savings and ROTH IRAs.
Save, Save, Save!
Saving for retirement is about much more than just putting money in the bank and leaving it there for retirement. Saving must be strategically done to maximize the benefits. This can be done through regular IRAs, 401(k) plans, 403(b) plans, SEP-IRA, or any other means possible to make sure the money you save is making as much back as possible. When you get a raise in your income, raise your giving to your savings plan, as well. You should also put in as much as possible into ROTH IRAs since the amount is not taxed. Saving money in the most intelligent way possible is the key to saving for retirement.
Consider Tomorrow Today
There is a saying that demonstrates the importance of never forgetting your retirement goals, even today. “If you’re willing to what others won’t for a year, you can do for a lifetime what others can’t.”
What does this saying have to do with saving for your retirement savings? A lot. If you are willing to give up some luxuries today and invest that money in your future, you can live better than others later for the price of your sacrifice. Giving up something today for something better tomorrow can be applied to many areas of your life, but it also applies to your retirement.
There is not one approach to save for retirement. It’s important to note, however, that some of the traditional methods of saving for tomorrow are not as sufficient as they once were. By taking a creative approach and looking at saving what you can today, tomorrow will be a much brighter day.
