$1,000.00 TOTAL in savings and investment? I wish on this April Fool’s Day 2014, I could say this was a joke. Unfortunately, According to the 2012 Employee Benefit Research Institute’s Retirement Confidence Survey, 30% of workers have no more than $1,000.00 total in savings and investment. This is truly a stunning statistic.
Tragically, this is only one small statistical piece presented by this survey — there are many more disturbing statistics about Baby Boomers and Gen-Xers (like me!) and their utterly poor savings and investment habits. Sadly, this is not just a blip on the radar, but a well-worn trend.
I’m not sure about any of you, but I really am not very interested in working any job after my mandatory retirement age of 65. I’m also not super confident that social security will be anywhere in sight when I get there. I’m also sure that some of you have noticed that Corporate America is not very excited to fund retirement plans for their employees (defined-benefit or DB plan) in recent years. A report produced by the Treasury Inspector General in 2010 notes that “retirement plan participation has increased, but responsibility for funding retirement plans has shifted to the individual”. The shift from DB plans to defined-contribution (or DC plans) has been dramatic. In the late 1970s, fully 65.8% of workers were participating in a DB plan. Just 20 years later, only 32.2% were participating in same. As if this wasn’t an important enough development, people have started to live longer.
The Treasury survey also points out that there is a 47% chance that of the couples that reach age 62, one partner will attain the age of 90! Okay, you get the idea and my train of thought. No one is going to plan for your retirement like you will, and no one will save and invest in your retirement the way you will so that you have enough financial resources to see you through your retirement years.
There are a boat load of tools and calculators online to help you figure out just what you’ll need to retire with and how to budget for it. Once you have determined how much money you will need, maximizing the retirement platforms at your disposal is next. If you are a W-2 worker, it may be a DB plan. Most likely though, you’ll have a 401(k), 403(b) or the like. And while there is a full menu of plans that an employer can offer to their employees, as a worker, you also have options for retirement savings outside of your employer’s plans.
If you want to contribute more money toward retirement outside of your 401(k), you can open an IRA, or a Roth IRA. If you have an entrepreneurial streak and want to start your own business, a Self-Employed 401(k) may be an option. Each of these non-employer sponsored options need be opened at a brokerage house like Fidelity or JP Morgan, but can be opened as a custodial account. Opening a custodial account has many great options for expanding your investment horizons and have many fewer restrictions on what you can and cannot do with your money. Ahhh, independence!
Just because it’s April Fools doesn’t mean you have to be foolish about saving and investing for your retirement. Figure out whether you are on track, make adjustments and meet your retirement goal.
To view the entire Employee Benefit Research Institute Study, visit http://www.ebri.org/pdf/briefspdf/EBRI_IB_03-2012_No369_RCS2.pdf
To view the entire Treasury Inspector General report, visit http://www.treasury.gov/tigta/auditreports/2010reports/201010097fr.pdf
CREtirement 