Retirement Blunders

Did you know that in 2007 80% of Americans believed their standard of leaving would increase in retirement, even though an over whelming 60% had not yet saved for retirement?  This economic recession has been a wakeup call for many workers and retirees who have fallen victim to the retirement blunders of lack of planning and poor preparation.

Blunder #1: Lack of Planning

With all that demands our attention today, often times it is difficult to plan for events in the future.  Retirement is one of those.  According to the Employee Benefits Research Institute’s 2010 Retirement Survey, only 46% of Americans have tried to calculate their retirement needs.  Even though most workers look forward to a day when they can retire, not even 50% have tried to create a proper financial plan for it.  A thorough, documented retirement plan is crucial to enjoying a stable retirement. 

One aspect of retirement planning that we drill our clients on, time and time again, is inflation.  And not only inflation up to the time of their retirement, but during their retirement, as well. While factoring in inflation is not a new concept, it is amazing how few people take it into consideration.  Inflation is the number one factor that reduces investment returns and can drastically reduce the purchasing powering of your retirement funds.        

Blunder #2: Poor Preparation

The follow-through of retirement planning is retirement preparation.  Many people are drastically behind in saving and investing for retirement.  According to the EBRI survey, it was reported that 43% of American workers have savings and investments of less than $10,000.  Fifty-four percent of workers have accumulated less than $25,000.  For even those who plan on skimping in retirement, which most would prefer not to, $25,000 would not even last a year.

In matter of fact, EBRI states that "if current conditions persist, nearly three in five baby boomers (59%) will be at risk of running short of money in retirement."  The data goes on to show that even if market conditions were to improve, that risk only falls to 47%--almost one in two baby boomers.

Up until the bubble burst in the housing market, many thought they were prepared for retirement because of the equity supposedly in their home.  Now that home values have plunged and equity has vanished, many hopeful retirees that speculated on retiring on the equity in their home, and had little savings and investments otherwise, have had a rude awakening.  Speculating in real estate, stocks, or other investments is not a good way to build wealth and prepare for retirement.  Speculating is NOT investing.

The best way to prepare for retirement is by being dedicated to a plan of consistent saving and smart investing.  As the old British Army adage goes, "Prior Planning and Preparation Prevents "P" Poor Performance."

Don’t let these two classic blunders—lack of planning and poor preparation—prevent you from enjoying a long, happy retirement.