By John R. Berry, CFP® & Beth H. Watson, CFP®
There are MILLIONS of articles online about how most Americans are behind on retirement savings.
It’s not just the Boomers, the youngest of whom turn 59 this year. Financial media have also labeled Gen X’s retirement outlook “bleak.”
To answer your first question, you are probably behind on retirement savings. Most financial planning projections assume you will retire at 65 and live to 100.
If you won’t have enough money after starting Social Security to fund your lifestyle for 35 years, then you probably have some work to do.
It’s your problem, but it’s not all your fault.
In a historical context, the idea of retirement for the everyday Joe or Jane is still in its infancy. A hundred years ago, most people worked until they died, which was usually in their late fifties.
Medicine has boosted this average by about 20 years, but that doesn’t mean we have the physical or mental grit to hold down a job for 70 or 80 years.
Social Security and corporate pensions were established to protect the “very old” and usher older, less productive workers into their easy chairs, not to fund the lengthy retirements we are seeing now.
In the late 20th century, new account types like 401(k) plans and IRAs were created to supplement Social Security and pensions.
Just a few decades later, you are responsible for saving the majority of what you need for an ever-expanding stretch of golden years.
But nothing about our history, culture, business climate, or education system has prepared the average American to save large amounts of money for a far-off date.
So what should I do?
If saving for retirement were a benchmarked, standardized test, the widespread “failure” rate would trigger an official government inquiry.
However, we’re all adults here. No one is coming to rescue your retirement.
If you worry about retirement readiness, there are three practical steps we’d suggest you take.
First, take 100% responsibility for your situation. Adopt that mantra of NASA Mission Control:
Failure is not an option.
This is your life. Don’t make excuses or be distracted by your lack of a workplace retirement plan.
By taking responsibility, you gear up for the next step:
Acknowledge you may have some work to do.
It’s important to be open minded at this point. In our financial planning practice, we have to recommend strategies no one wants to hear: downsize your home, spend less, sell a car, stop helping your adult children, work longer.
These suggestions may not apply to you, but often the changes needed at older ages are more drastic if a client really wants to see progress.
Third, now it’s time to thoroughly analyze your current situation. What kind of trajectory are you on, given your current assets, liabilities, and savings rate? If there’s a large divergence between your current and your desired paths, what adjustments in lifestyle or expectations could you make?
In our office, we see the challenges clients and prospective clients face when the magical retirement age of 65 peeks over the distant horizon, and—kids raised, tired of the 9 to 5—they realize they aren’t very prepared.
While many working decades may be behind you, a thoughtful assessment of your situation and values can be followed by a decision to make progress toward a more secure financial future.
Even the oldest Gen Xers aren’t 60 yet. That latchkey group’s attributes of resourcefulness and skepticism of authority will serve them well when they realize they need to make a change.
None of us will be 25 again. But with a decade or more until it’s time to give notice at your full-time job, you can still plan to be in a better financial place than you are right now.
More FAQs:
Should I take my money out of the markets?
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through ICA Group Wealth Management LLC, a registered investment advisor. Corner Post Financial Planning and ICA Group Wealth Management LLC are separate entities from LPL Financial. LPL Financial does not provide tax or legal advice.