Hey baby boomers! Maybe it's time to stop the intricate retirement planning, and just start saving as much money as you can. After all, there's no time like the present to start seriously saving for a rapidly-approaching retirement.
Ideally, your retirement income should come equally from your own retirement plan, your savings and Social Security.
Despite criticism from folks who are ideologically opposed to Social Security, the system is in much better shape than most personal retirement plans. Currently there's a $2.4 trillion surplus. If we do nothing to adjust the program, full benefits can be paid until 2037. After that, we still will be able to pay 70 percent of promised benefits.
Unless the political tides really shift, you can count on some income from this program.
Most current retirees grew up with that Depression mentality that the economy could collapse at any time, and they actually saved for their retirement. Unfortunately, the same cannot be said for their children, the baby boomers. Growing up with unprecedented prosperity, most boomers didn't develop values of thrift and saving and are not as well prepared for retirement as their parents were.
The boomers are now roughly between the ages of 45 and 63 and even the youngest boomers should be well on their way toward developing their nest eggs. The magic of compound interest will help them over the next 20 years, if they choose to take advantage of it.
The big question is how many of them will do so. There's a lot of "sticking your head in the sand" going on. About two-thirds of boomers do not expect that their retirement living standard will go down, yet their savings rates make that expectation impossible. Seventy percent say they expect to work in retirement, but 40 percent of them won't have that option because of health issues or age discrimination. Some plan to finance their retirement through inheritance. That's not likely either, because with longer life expectancies, parents will need every penny they have themselves. There's really not any alternative to just biting the bullet and saving. Yet a fourth of workers do not take advantage of their employer-based retirement savings plans at all. Only 10 percent of those who do contribute the maximum they are allowed. More than a third of the boomers simply are not willing to cut back on their lifestyles to save for retirement. If you are among the youngest of the boomers, your nest egg should be well on its way. Let's assume a nest egg goal of $400,000 when you retire in your mid to late 60s. Let's also assume that you earn the average U.S. salary, put 10 percent aside for retirement and get a 2 percent return on your investment. To reach your goal, you currently should have about $120,000 in retirement savings. This example assumes that you will maintain the same patterns in the future.
If you are not where you need to be, make a New Year's resolution to do something about it. Make a concrete plan. Don't fret about how much you are going to need, just make a plan that lets you save as much as you can. Agonizing about unpredictable details just paralyzes you into doing nothing. Here are some things you might consider. Make a commitment to save at least 10 percent of your earnings. Yes, it will hurt. Deposit your funds directly to your retirement account. If your employer offers a good retirement plan, especially one that matches your contribution, take advantage of it. Don't be disappointed if your savings accumulate slowly. The most spectacular growth occurs 10 to 20 years down the road. That's why it is so important to start early. At some point you may want to see a financial counselor, but right now, don't overcomplicate things - just get started. Hanns Pieper is professor of sociology and gerontology at the University of Evansville. If you have questions about aging, send them by e-mail to email@example.com, or write to him in care of Family, Evansville Courier & Press, P.O. Box 268, Evansville, IN 47702.