Retirement preparation usually is the last thing on the mind of young employees who have just graduated from high school or college and are just starting their careers. They usually concentrate on getting enough money to buy a car or to pay off their college loans. That of lack of interest in retirement planning is a counterproductive attitude to have. Retirees today, because of modern medical advances, can expect to live longer than their parents lived. It is important not to run out of money while in retirement.
Too many employees in their late 20’s or early 30’s also have higher priorities than preparing for retirement. They often have just bought a house and are house poor. Perhaps they also are just married and are struggling to pay for their growing family.
When in their middle ages, these employees often are struggling to help their children pay for college costs. Other employees this age might be attempting to help their recently launched children to survive as they start careers and attempt to become financially independent.
As retirement nears, these employees start to think about preparing for retirement. It is unfortunate that they wait so long. Usually, the earlier that employees start to save for retirement, the more money they will have accumulated for retirement.
Sometimes the anticipated retirement date is not the date that these employees expected. The Voya Financial Group research showed that, for 60% of retirees, the retirement date was completely or somewhat unexpected. Furthermore, the Employee Benefit Research Institute reported that half of employees left their jobs earlier than the date that they expected to leave. Some of the reasons for their early exit dates included personal health issues, the need for new skills that they did not possess, the need to care for a family member, and job elimination.
Those who are approaching retirement and who do not have enough money saved for retirement have four options. They can earn more money, save more money, or do a combination of both. If these strategies are not effective, the forth option is to experience a very low standard of living.
Earning more money might not be a good option for many employees. Because of age discrimination, older employees who have lost their jobs often have trouble finding jobs as good as the jobs they have lost, even if their health and the health of their family members is good. With the lower paying jobs they can find, employees who have not prepared well for retirement may have to work indefinitely into their retirement years, if there health remains good enough.
Saving more money is an option, but if saving for retirement starts too late in careers, the amount that needs to be saved can be overwhelming. It is easier to save enough for retirement over a forty year period than it is to save enough over a five or ten year period.
When employees begin their careers, they should attempt to work for employers who have retirement plans with employer contributions, or at least 401k plans. These plans will arrange it so that, with each paycheck, employees will automatically be paying themselves first for their retirement.
Those who are even more diligent in preparing for retirement will start an IRA early in their careers. The IRA will give them tax advantages as they save for retirement.
Employees should be debt free when they retire. If that is not the case, a reverse mortgage might help them to become debt free.
This article is too short to do anything other than to give a general overview of retirement issues. Individual research or retirement counseling are good investments of time and money.
How old are you, and what preparations have you made for your retirement? Please comment below.