Thinking about Retirement

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Retirement is the time when people look forward to not working, doing things they’ve always wanted to do, having less responsibility and not having to worry about money. Unfortunately for many individuals it does not happen that way. The estimate is that less than 10% of the USA population is financially prepared for retirement. Today many seniors are forced back into the job market just so they can pay their bills. Many have health issues, are caring for elderly parents or grandchildren, and have reduced their standard of living. Life today has presented them many new challenges. This is forcing us to redefine the definition of retirement.

The subject of retirement is very broad with many categories and subcategories. Though all of these do not involve personal finances, most of them have something to do with money. My parents paid for their home before they retired, had some investments, a pension and social security. Today’s generation may not have these options. With the high rate of divorce many people are starting over several times. They either lose or have to share their equity. The current mortgage crisis combined with increasing real estate prices is creating housing problems that are trickling down to all areas of our lives.

The stock market and real estate have been two of the major vehicles individuals invested in. Many people had hoped this would supplement their retirement income. Both of these markets are struggling and the experts can not agree on how long this will last or what the final outcome will be. Numerous people have lost their pension plans. Companies continue to downsize, merge with other companies, and reduce their benefits. We can no longer depend upon our companies to take care of us.

It is questionable if Social Security will be available in years to come. The experts can not agree on when the fund will become bankrupt but everyone agrees the government has a deficit. It seems unfair that most of us have paid taxes our whole life with the expectation that we would receive money when it was our turn. The government can not continue to spend money it does not have. Anyone under age 55 may not have social security as part of their retirement package.

Considering what retirement is like today, what can a young person do to prepare for life as a senior citizen? The number one thing I believe today’s generation needs to do is change their attitude toward money and saving. Unlike previous generations our children have grown up on credit cards. They need to save more money, use less credit and limit the total amount of their debt. They need to learn how to live within their means, get by with less stuff, and not make purchases just to be like everyone else. They need to do a better job of managing their money than many of their parents did. As a society we need to put less emphasis on material wealth and quit defining success by how much money someone makes. Many people have gone broke while trying to prove to others that they had arrived.

Today’s generation needs to take full responsibility for their financial future. Don’t depend upon pension funds, the union, your employer, or the government to take care of you in your old age. Start saving for your retirement early. That way you will have to put in less money and the money will have longer to work for you. Make plans and set goals. There are many web sites that help you figure out how much money you will need for retirement and how much you need to save to make that happen. www.aarp.com has a wealth of information. Consult a financial planner if you feel the need for more help.

Though you should not depend upon your company to take care of you, you should invest in any 401 plans that are available. Put the maximum amount in, especially if there is company matching. These plans were designed for retirement income. Yet many people use them as savings accounts. It’s not a good idea to take money from your 401 even if you pay it back. When you leave the company you should roll it over to another plan instead of cashing it out. Open Individual Retirement Accounts, especially a Roth if you need college funds for your children. Contribute the maximum.

It seems that many Baby Boomers, especially women, did not take an active role in planning for their retirement. It’s almost like many of us thought things would just work out. Our children can not afford to have this attitude. In today’s changing world it is critical for them to actively plan their retirement. My heart breaks when I hear some of the horror stories and difficult choices seniors today have to make. Hopefully by listening we’ll decide to make sacrifices now, which will enable us to save more, and not have to skip medications and eat cat food when we get old, like many of today’s senior citizens do.

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