Retirement Savings & How You Can Do Better.

Retirement Savings is one of the most important financial goals for everyone. If you are not going to be on the receiving end of a large trust fund or are not already wealthy, saving for retirement should be at the top of the list as a financial goal.

Having concerns about retirement is something a number of people have. As we age there can be growing anxiety if there will be plenty of money available to live comfortably to the end of life.

Retirement years should be a time that is enjoyed. Yet, a large part of society does not plan properly for retirement income. Planning for a comfortable retirement is not an option to delay. Why is it so important to plan for the years when our working life ends?

Alarming Statistics on Retirement Savings

There was a time when people went to work and it was not uncommon to stay with the same employer for a lifetime. This provided a reliable paycheck and a pension that would pay a retiree for the rest of their life.

The computer and investor driven age in the 21st century have distorted the industrial age norm and for quite some time pensions have all but disappeared for a large number of workers.

Not having an employer-provided pension has put the responsibility of retirement savings on an individual and not many employees are taking the accountability seriously.

It is estimated that 1 in 5 Americans has no retirement savings according to a 2018 Planning and Progress study by Northwestern Mutual. Furthermore, the study revealed that only 33% of the generation closest to retirement have between $0 and $25,000 saved. This amount of savings is not nearly enough to produce an income for several years of retirement.

Not having sufficient retirement income is a serious issue. This shortfall in money available for retirement is only increasing as people are living longer. In addition, it does not appear that the rising costs of healthcare will be declining anytime soon.

Extinction of the Defined Benefit Pension Retirement

Defined Benefit Pension plans are a type of retirement plan where an employer pays a set amount of money in retirement for life. The amount is most often based on the last salary of an employee and their years of service. This type of pension was offered by many employers at one time, but it has been declining for several years.

The Bureau of Labor Statistics released a report stating that only 18% of private sector employers offer a Defined Benefit Pension as of 2017. Public sector employees are still offered these pensions and at a larger percentage compared to private employers. This is mostly seen in governmental job positions. It is estimated that the number of these Defined Benefit plans may eventually go to zero in the public sector.

Why are Defined Benefit Pensions Being Eliminated?

The simple reasons employers are eliminating Defined Benefit Pensions is the cost and risk. These types of plans are more expensive to administer. The way they work is the employer offers a guaranteed income. With market downturns, it can be more challenging to pay out on the pension. This is a risk employer’s take and they are choosing to minimize this risk.

With the drop in Defined Benefit Pensions offered, workers have a growing responsibility to manage their own retirement savings through Defined Contribution Plans. These are retirement plans that may be associated with a 401k.

The employee makes contributions and the employer may make a contribution in the form of a matching dollar amount. This is the increasing type of retirement plan while the Defined Benefit plan is done away with over time.

Don’t Want to Continue Working or Can’t Work

Without having a good amount of retirement savings or skills in personal development, it is easy to claim that we will just work until we no longer can. However, the reality is not many people want to work forever. There may come a time when you just don’t want to work any longer. There could be several reasons for this, such as dislike for the job or being phased out by younger workers. As we get older, we also tend to get tired easier and don’t have the same energy.

It’s not just a matter of wanting to not work any longer for the reason to retire. Health issues are more likely as people age as well. The possibility of things that could limit a person’s physical activity is a cause for concern. If something like this were to occur, it may not be possible to work any longer.

Retire Early

It’s not entirely impossible to retire earlier than what would be considered a normal age to stop working. It is a potential reality with saving early or taking up a side investment that does not affect you while you work. A young adult that begins saving in their 20’s and living well below their earnings with a goal to retire in their 50’s is not far out of reach. With control over impulse buying, not getting into debt, and planning early, a young retirement age could be a goal.

Retiring early has a number of advantages. The period of time sacrificed for living with limited spending could then be enjoyed. This would equate to being able to enjoy life and spend more time with family and friends.

Return from retirement savings to planning for retirement

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