Retirement. It sounds like such a long way off; why worry about planning for it now? After all, just paying the bills and putting food on the table is tough enough for most of us. Plus, there will be plenty of time to save for retirement after the kids are gone, right? Unfortunately, this is normally not the case. In fact, when preparing for your golden years, time is your biggest ally.
Surveys consistently show that only 4 to 7 percent of those who retire each year are financially independent. Other couples must depend on Social Security, relatives, welfare, or other charitable means to live. Poor planning is the primary culprit for this sad statistic. Conversely, good planning can make retirement years some of the best years of your lives.
Why do people fail to prepare adequately for retirement? Most do not understand its importance, and they lack the basic knowledge to plan properly.
Very simply, all retirement planning centers around two key elements: (1) Saving enough and (2) Investing your savings properly for a good return. Many factors are involved in each of these elements, but they represent the essence of retirement planning.
There were days when the average worker retired at age sixty-five and died at seventy-three. Planning for eight years of retirement was not an ordeal. Between Social Security and a generous pension from a company for which they had worked over thirty years, the need for personal savings was minimal.
Things are much different today. The employee who works for one company most of his life and earns great pension benefits is becoming a character in a history book. Due to leaps in the medical field, average lifespans are increasing at a dramatic rate. At the same time, many people now opt to retire at ages well below sixty-five, meaning that an increasing percentage of workers will find themselves retired for longer than they worked. The need for good planning is greater today than at any time in our history.1