Let's face it, most of us would rather do just about anything than work on our retirement plans. But the reality is, if everyone does not take it on as a personal priority, it will never get done. I can't stress enough how important it is for all Americans to begin planning today for their financial futures, making sure they will have enough retirement income to last as long as they do.
- Think about your "retirement horizon" -- Today many retirees will retire earlier and live in retirement longer than their parents did. A retirement of 20 years or more is becoming more and more common. This longer "retirement horizon" means that your retirement income will have to last longer and go farther, particularly if you plan on living an active retirement lifestyle.
- Plan for income -- Social Security was never intended to meet all of your retirement income needs -- it typically only provides about one-third of the average American's retirement income. Unless you have a large employer pension plan, which most of us do not, another reliable source of guaranteed income is necessary to help cover your retirement costs for as long as you live. Annuities are one option a growing number of Americans, including myself, have selected as a means to generate this income.
- Account for inflation -- Inflation can wreak havoc with your savings if you don't plan for it. For example, today's U.S. inflation rate is about 3 percent. Assuming inflation continues at this rate on average, your $50,000 in savings in 2005 would be worth roughly half its current value in 24 years. What can you do about this? Make sure your retirement plan includes investments that provide large enough returns to outpace inflation.
- Manage your fear factor -- Many Americans fear they will not have the resources necessary to achieve financial security. In fact, a recent study showed that a whopping 95 percent of Americans have some type of financial-related retirement fear, such as running out of money or outliving their savings. Don't let these thoughts paralyze you from taking action. Prudent planning now can alleviate many of these fears.
- Talk to a professional -- Retirement planning can be a complex process. For many, it's difficult to even know where to begin. Talking to a qualified financial/retirement planner is a great place to start. If you don't know who to contact, start by asking family, friends or associates who can point you to someone who has helped them. You can also talk to other financial professionals you know -- your banker, life insurance agent, investment broker, accountant, or estate-planning attorney -- who can point you in the right direction.
As more baby boomers inch closer and closer to retirement, many need to shift their traditional thinking from a focus on simply saving for retirement, to ensure that their hard-earned nest eggs work better for them. Making sure that they will have enough retirement income to supplement Social Security, help cover retirement expenses and last the duration of their retirement, is key to retirement planning success.
The main idea I want to impress on Americans is that the quality of your retirement will be based on the quality of your retirement income, and that will be based on the quality of your retirement planning and your commitment to your plan. It's just that simple."
- By Ben Stein, National Retirement Planning Coalition