Half of Americans Wished They’d Started Retirement Savings Sooner

More than half of Americans will retire broke

NEW YORK (MainStreet) — Half of all working Americans want a retirement-savings do-over as they fall short of their goals.

TIAA-CREF's Ready to Retire survey reveals that and a lot more than once again points to a retirement savings landscape where millions of Americans believe they won't have enough cash to live on in retirement and wish they’d emphasized "financial readiness" capacity during their saving years.

The report says 52% of Americans approaching retirement say "they wish they had started saving for the future sooner" and that many worries about not having enough money to cover their monthly expenses (45%), while others are anxious about how health care costs (35%) or inflation (32%) could deplete their retirement savings.

As usual with surveys on Americans and their retirement savings, there's a disconnect in what savers say they need to accomplish and what they actually accomplish. For example, 45% of survey respondents age 55-64 say "financial readiness is the most important factor in determining when they will retire," but only 35% say they saved in an IRA or met with a financial advisor.

Regret about what could have been also dominated the survey. "Many respondents say they wish they had made smarter financial decisions earlier in their career, including saving more of their paycheck (47%) and investing their savings more aggressively (34%)," the report says. As a result, TIIA-CREF reports that 68% of Americans near retirement say they are "not prepared" financially and another 42% say they will have to keep working in retirement and 39% must "limit" what they spend.

"This research reinforces that preparing for retirement shouldn't become a sprint to the finish, but rather a long-distance pursuit that requires careful planning throughout an adult's life," says Teresa Hassara, an executive vice president at TIAA-CREF.

The survey results should act as a prod to better saving habits. "This will help prevent those nearing retirement from feeling like they have to play catch-up near the end of their careers," Hassara says. "Developing and acting on a carefully constructed plan can help individuals at any age build a financially secure future."

The news isn't all negative for low savers. Hassara says many older workers can make up a lot of ground if they act right away. "If Americans find that their retirement savings aren't adequate to meet their expectations about retirement life, it's never too late to make adjustments," she says. "In fact, if a 55-year-old starts to max out his or her employer-sponsored retirement plan contribution next year and continues to do so for the next 10 years, those savings could grow to about $325,000."

10 Benefits to Delay Your Retirement

If you are fit and healthy, it is wise to delay your retirement. Working longer is beneficial financially, physically, psychologically, and mentally especially when you enjoy doing what you do and are happy about it.   

1.      Live longer: We are now more health-conscious because we have access to vast information on aging and healthcare. It means we will live longer than before. However, living longer in a world of inflation with the burgeoning cost of medical expenses is very challenging. Will your retirement fund outlive your life or you outlive your retirement fund? Do not be surprised if your retirement years are just as long as your working life, if not longer. The only solution, if you are fit, healthy, and employable, is to work longer.       

2.      Get paid and do what you enjoy doing: If you enjoy doing what you do why not continue and work for a few more years? After all, you are paid to do your job.   

3.      Delay dipping into your retirement fund: When you get paid every month, you do not touch your retirement fund. Instead of getting depleted, it grows.

4.      Maintain your lifestyle: You do not need to adjust your way of life and trim your expenses because you do not have a regular source of income. You continue to live life as you used to be with a monthly paycheck.

5.      A self-esteem booster: When you look around people of your age they have nothing to do but to engage in idle chitchatting to pass the time at the coffee shop and yet you are gainfully employed. It’s reassuring to know that you are still productive.

6.      Delay brain aging: Working is the best for your brain to stay sharp, active, and healthy.  Bear in mind that you are able to keep your job because you still can contribute and perform.

7.      More time to grow your investment: Investment is not a get-rich-quick scheme. A good investment like blue chips takes time to appreciate in value. When you do not liquidate your investment to fund your retirement, you allow your wealth to increase in value. 

8.      More time to save even more: While you are employed, you and your employer continue to contribute to your retirement

scheme. It means you are able to save and earn more interest. 

9.      Stay current: It is an excellent way to keep up with everyday changes. According to an article, Learn, Unlearn And Relearn: How To Stay Current And Get Ahead,  Since change is the only constant you can truly rely upon, learning to navigate and adapt to it is not just important to your survival, it’s essential for you to thrive in the bigger game of life. Learning new things is fun, exciting, and life-enriching.

10.  Fulfilling life: When you are employed you continue to take part in social engagement and maintaining friendships. Getting connected is a big part of a meaningful life.

Conclusion

It is necessary to sustain healthy habits like daily jogging, mediation, and getting sufficient sleep every night to unwind, relax, and control stress. Drink plenty of water and eat healthily to nourish your system and provide energy to work hard and smart.   

7 Things to Do Before You Retire

Preparation for old age should begin not later than one's teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement. ~ Arthur E. Morgan

It is reported that the average lifespan of Malaysian is about 75 years. When you retire at age 55 there are still 20 years ahead of you to live. What should you do before you retire so that you are financially independent during your golden years?

1. Settle all debts: Settle all your housing loan and car loan and most important of all, your outstanding credit card debts. To be debt-free is the way to live a carefree life for senior citizens. 

2. Reduce investment risk: Assess your portfolio and rearrange to reduce risks. As a simple example, when previously your investment consists of 60% stocks and shares and 40% fixed income perhaps you should now change to 40% shares and 60% fixed income.

3. Stick to a budget: When you retire, there will be no regular sources of employment income except your own savings and investment. It is important to stick to your budget so that the fund can last you as long as possible.

4. Emergency fund: It is needed more than ever before, especially to cover unexpected emergency medical treatment and related expenses. The amount should be readily available. 

5. Cash flow: Determine the amount you require every month and ensure that there will be steady streams of cash to meet your monthly needs. 

6. Mental attitude: When you retire from work, you do not retire from life. The key is to live a meaningful life when you stop working. Continue to stimulate your mind by learning new things that you are interested in. Blogging is an excellent way to fill your time. You learn about blogging and write articles on your blog every day.

Don't act your age [in retirement]. Act like the inner young person you have always been. ~ J. A. West

7. Look after your health: When you need insurance the most at old age, insurers stop covering you or if they do, it is going to cost you a bomb. The key is to look after your health to avoid critical illnesses and falls.

After you're older, two things are possibly more important than any others: health and money. ~ Helen Gurley Brown

Are you ready to enjoy your retirement?

Source: 7 Things to Do Before You Retire

10 Components of a Happy Retirement

Money is only one of the ingredients you need to live well in retirement.

Financial preparations are an important component of any retirement plan. But money alone is not enough to live a satisfying retirement.

Equally important is a plan to spend your time, develop relationships with others, and maintain your health. Here are the important ingredients for you to realize the best possible retirement:

Enough money. Obviously, if you do not have enough saved and invested, you cannot realistically retire, at least not with the lifestyle you desire. But simply reaching a number in your retirement account is not the only aspect of retirement you need to plan for.

Having control over how you spend your time. One of the best things about being retired is the ability to decide what you want to do when you want to do it. This type of freedom is rarely experienced by those not yet retired. If you were to find yourself forced to live according to someone else’s expectations, retirement would be nothing more than an extension of your work years. But you get to leave behind other people’s rules as you begin to live your second act.

Spending quality time with family and friends. No longer finding yourself captive to boring meetings and meaningless interactions, you are now free to spend time with people you are actually interested in being with. And you are no longer limited to brief visits squeezed into a busy schedule. You have as long as you want to spend with whomever you choose.

Pursuing your passions, hobbies, and interests. With the freedom to do as you choose, you can finally revisit the dreams and interests you were forced to put aside due to the demands of earlier life. And with enough interests and variety, you can prevent boredom and enjoy active stimulating days.

Giving back. Retirement can be your chance to express your charitable side and give back to society. Many retirees find volunteering to be a very rewarding experience. You are free to choose the causes most significant to you and make a difference in the lives of others.

Improving your relationship with your partner. Now that you have time to dedicate to the important matters in your life, the happiness of your spouse is an excellent place to start. You have time to spend with one another and rediscover the special person you fell in love with long ago. Although in some areas you may have changed over the years, some things never change.

Enjoying new experiences to broaden your horizons. You are no longer forced to live within the boundaries that defined the working you. The freedom to experiment and explore can open doors to interests you never knew you had.

Living a comfortable and safe life. Retirement is not always about searching for the next adventure. It also allows for the chance to relax, slow down, and enjoy living at a pace more appropriate and comfortable for you. A balance between staying active and relaxing can keep you invigorated and ready for whatever comes your way.

Taking time for yourself. Downtime, the rarest of commodities for busy working folks, can now be yours in retirement. Taking time to think, relax, contemplate and dream can inspire you to live a more fulfilling retirement. Just remember that it is up to you to set aside the time and take advantage of your situation.

Maintaining good health. The freedom to do as you please affords the opportunity to refocus on healthy habits and practices. If you feel good it is easy to look forward to what the day has to offer. When it comes to healthy living, a regular routine that you can stick to can get you started in the right direction.

Assuming you are relatively satisfied with your nest egg and believe you can pay your way through retirement, it’s time to start thinking about the other aspects of retired life. In retirement, you finally get the chance to do things your way. Make sure you include a plan for your health, relationships, and passions.

How to Start Saving For Retirement

Perhaps you heard it from your parents, some guy you know who “really has it together” or maybe you’ve read it on a blog like this one. Regardless of where you got the advice: You know that it’s never too early to start saving for retirement. That means if you have a steady job, you should start to save for retirement

. But how? We get more questions about retirement savings—including 401(k) plans and individual retirement accounts—than any other topic. And no wonder: It seems complicated, it’s boring as hell and, at the end of the day, retirement seems like a long way off when you’re in your twenties.

No matter. You can learn how to start saving for retirement in the five minutes it will take you to read this article, and you can probably start doing it in less than an hour. So if you know that you should start saving for retirement but have no idea where to start, roll up your sleeves, brush off your fear and let’s get started.

Retirement Savings 101

Okay, so why do you even need to save for retirement, anyway? Because lucky for you, thanks to our modern quality of life and medicine, chances are good you will live to a ripe old age. And when you’re approaching 80, you may want to do something other than work. And although Americans receive Social Security benefits after a certain age, our younger generations cannot count on these government benefits alone. They won’t be enough to live on if they’re still around at all. We need to take charge of our own financial future and we do that by saving for retirement. The government will even give us some tax benefits if we do.

Finally, the earlier you start saving for retirement, the better: The more time you let your investments grow, the less money you have to stash away in the first place. (For more about retirement saving basics, read 23 Things Every Beginner Should Know About Retirement Savings).

How to Start

Anybody can start to save for retirement. We’ll cover the two most common ways.

The 401(k) Plan

If you work full-time, ask your human resources manager if your company offers a 401(k) plan or 403(b) plan (if you work at a non-profit). These plans allow you to save for retirement with automatic deductions from your paycheck up to $16,500 a year (in 2010). The best part is you do not have to pay taxes on the money you save. Even better, some employers will match some of your savings (usually a percentage of your salary). When you enrol in your company’s 401(k) plan, you will need to choose among a limited number of investments your plan offers (typically, you are limited to a few choices). Ask to speak with your plan manager for recommendations, or simply choose a target-date mutual fund for the year you will retire. These funds are collections of investments that the plan continually adjusts to maintain appropriate risk and return for your anticipated retirement year.

The Individual Retirement Account (IRA)

If your employer doesn’t offer a 401(k) or 403(b) plan or you want another option, start an IRA. You can open an IRA for free and often with no minimum deposit at most any online broker and can invest however you want (in any stock, bond, mutual fund, ETF, etc.) Investors under the age of 50 can contribute up to $5,000 a year (for 2010) to either a traditional IRA or a Roth IRA. These two types of IRAs often confuse new investors, but choosing can be easier than you think:

• Traditional IRA: Money you put in is tax-free (you can deduct the contributions on this year’s tax return). Choose a traditional IRA if you don’t have a 401(k) or other retirement plans at work.
• Roth IRA: You cannot take a tax deduction for the money you put into a Roth IRA, but you won’t have to pay taxes on the money you withdraw in retirement. Choose a Roth IRA if you do have a 401(k) or other plans at work and you do not earn more than the Roth IRA income limits.

Upon opening an IRA, simply set up automatic investments: transfer money from your checking account to your investment account every month or pay period and forget about it, just like employers do with 401(k) plans. Finally, whichever type of IRA you open, you will need to choose how to invest the money. Choosing from the entire universe of investments is more intimidating than selecting from among a few mutual funds in a 401(k) plan, so proceed carefully. You can research investments yourself using a free tool like Morningstar or enlist the help of a financial advisor (paying an advisor big bucks in your twenties rarely makes sense, but you might pay a fee-only planner for an hour session once a year to help you pick out your starting investments). Whatever you do, resist the urge to do a lot of trading: Even if you get lucky, the commissions and fees will eat up your returns, especially when you’re just starting out.

That’s really all there is to starting to save for retirement. Whether you sit down with your HR person at work or open an IRA account at an online discount broker now, you can probably be saving in less than an hour. The only question is: What are you waiting for?

Retirement saving: Size isn’t the only consideration

I recently read one of those articles debating whether a million dollars was enough to retire on these days. Mostly, the focus of the article was on the fact that a million dollars aren’t as significant as it used to be due to the impact of inflation. That’s a good point, but it also got me thinking that the size of your nest egg is just one side of the retirement equation.

First, to quickly illustrate the inflation issue, consumer prices have roughly doubled over the past 26 years. That means that a million dollars are worth about what $500,000 was in 1988. To think of this on a forward-looking basis, suppose that inflation continues at a similar rate, which has been pretty moderate compared to longer-term history. If you are around 40 years old today and think you could live on a million in today’s dollars, then you had better count on saving two million because that will have the equivalent purchasing power by the time you reach retirement.

The deceptive thing about the size of a retirement nest egg is that the numbers always sound more lavish than they actually are. Between the erosive effects of inflation and the number of years over which savings have to last, it takes a bigger nest egg than most people intuitively expect to fund a comfortable retirement. But again, as challenging as that is, the size of the nest egg is only one side of the equation.

The other side is the question of how much that nest egg will have to buy, and there are several variables that go into this side of the retirement equation:

1. Your mortgage. Your home may be your biggest single asset, but it may be offset by liability in the form of a mortgage. While some people steadily pay down that liability so it will be gone by the time they retire, others continually renew the liability by borrowing against home equity. This makes a big difference in how big a nest egg you will need. If your mortgage is paid off, you will have much lower monthly costs and an asset you can sell at some point. If you still owe on your mortgage, it will probably continue to be your largest monthly expense.
2. Other debt It’s important to think of your nest egg on a net basis, where its value is offset by whatever you owe. So, if you have accumulated a significant amount of debt, your nest egg may be smaller than it appears. If it’s credit card debt, that’s even worse than offsetting because you are probably paying more in credit-card interest than you are earning on your retirement savings.
3. Where you live. The cost of living varies widely from one part of the country to another, so if you plan to live somewhere expensive, think of this as a form of “instant inflation” that will immediately reduce the purchasing power of your nest egg.
4. Lifestyle. What kind of retirement do you envision? Is it a quiet one of reading good books and working in the garden? In that case, a million dollars could still go a long way. On the other hand, if you plan to travel extensively and live it up, you could burn through that million long before you die. Retirement planning should include some rudimentary budgeting based on the lifestyle you plan to lead so you know how far your money has to stretch.
5. Social Security projections. Unless you are one of the ever-shrinking numbers of employees who still have a defined benefit pension, Social Security may be the only regular income stream you have in retirement. The size of that income stream goes a long way to determining how quickly you will spend down your nest egg. You can get a projection of what your benefits will be from the Social Security Administration, based on how long you worked and how much you earned. Getting these projections for yourself and your spouse will help you know how much of your remaining budget your nest egg will have to cover.
6. Work prospects. More and more people are augmenting their nest eggs by continuing to work in retirement, but whether or not this is a viable option depends on your health and the marketability of your job skills.

The point is, there is no universal answer to a question like “is a million dollars enough to retire on?” A million dollars may be plenty for some people, and not close to enough for others. It’s not all a question of how rich you want to be, but also of how well you’ve contained the liabilities that are going to offset that million dollars. So, if you want to make sure your retirement savings are sufficient, don’t just go by general benchmarks. You need to do some detailed planning to determine how big a nest egg will meet your specific needs.

Source: Retirement saving: Size isn’t the only consideration

Retiring Soon? Don’t Make These 8 Mistakes

There is plenty you can do to avoid running out of money in retirement. Whether you are newly retired or retiring soon, planning is key.

Some retirees just plunge in and get into trouble.

Eight money mistakes those nearing retirement made and how to avoid them so your lasts.

Mistake 1: Not planning for medical expenses

Medicare kicks in at age 65, but that’s not the end of your medical expenses. Fidelity Benefits Consulting estimates a 65-year-old couple retiring this year will need $220,000 of their own money for medical expenses over the course of retirement. Those include deductibles for Medicare Part A and Part B (in-patient and out-patient insurance) and premiums and out-of-pocket costs for Medicare Part D prescription drug coverage.

Take action:

• Call your state insurance commissioner’s office to get help choosing the most cost-effective Medigap plan.
• To help dodge expenses from illness and disability, exercise regularly, and stay at a healthy weight. (Get a physical exam before beginning a diet or exercise program.)

Check into long-term-care insurance. It’s cheaper if you sign up when you’re younger.

Think about moving closer to good medical centers, hospitals, and families.

Mistake 2: Underestimating costs

Retirement costs can be surprising. Surprisingly high, that is. You can manage costs by earning extra income in retirement. Here are the rules for working while receiving Social Security benefits.

AARP tells the story of Jackie Booley, who retired at 61 but later began working from home for about $9 an hour as a customer service representative. Numerous employers offer home-based jobs. But the field is rife with scammers, so learn the red flags.

Take action: Start shopping for jobs. (Research compensation at PayScale.com.) These articles have job ideas and resources:

• “Great Work-at-Home Jobs for Retirees” and “5 Part-Time Jobs for Retirees“ are among articles and resources at AARP’s job-hunting area.
• “10 Best Jobs for Americans Over 65“ from The Fiscal Times include casino work, market research, mediator, nutritionist, and Santa Claus gigs.
• “10 Part-Time Jobs for Retirees” from Bankrate lists consulting or freelancing, research for universities, government jobs, part-time seasonal work, customer service, teaching, and tutoring.
• “The Best Part-Time Jobs for You“ at The Huffington Post taps employment experts for ideas and resources. Among suggested jobs: bartender, tour guide, and flight attendant.
• For more ideas, read “7 Tips to Find a Job in Retirement.”

Mistake 3: Celebrating with a big purchase

No doubt you’ve got a wish list for retirement. But hold off major purchases and expenses at first to give retirement a spin and see what you’re spending each month. Track expenses – every single one. A year’s tracking gives the best picture because it includes one-time and seasonal expenses.

Take action: It doesn’t matter what tracking system you use. Just find one you like and keep it up. Keep receipts, watch bank and credit card accounts online on a weekly basis, and update your tracking regularly. Here are a few approaches:

• Free online budget programs. Money Talks News partner PowerWallet lets you track expenses automatically for free. It and other free money management services like Mint and BudgetTracker make money by recommending financial products and supplying coupons.
• Quicken. Users can enable online features or input expenditures manually. Cost: $30 and up.
• Microsoft Money Plus Sunset Deluxe. MSN’s popular software tool has been discontinued and replaced by (free download) Microsoft Money Plus Sunset Deluxe. It’s a no-frills product — no tech support and no linking to online accounts.
• DIY. Track expenditures manually and offline on a spreadsheet.

Mistake 4: Helping out the kids

Many parents set themselves up for a crisis in retirement by supporting adult children financially. A study by Merrill Lynch says 60 percent of people 50 and older are assisting adult relatives financially.

Most people realistically can’t do both. Adult children still have time to pay off college loans and save for retirement. Their parents are running out of time.

Take action:

• Make a concrete plan with goals and deadlines for gradually withdrawing financial help.
• Discuss the changes you are making with your kids.
• Help them learn to budget.
• Model financial restraint and responsibility for your kids.

Mistake 5: Claiming Social Security too soon

Waiting to claim Social Security benefits is one of the best investments around. Your Social Security account earns 8 percent a year when you hold off claiming benefits beyond your full retirement age.

If your full retirement age is somewhere between 66 and 67, your benefit check could grow by 32 percent if you wait until age 70 to collect, Social Security spokesman Michael Webb said in an email. If your full retirement age is 67, waiting until 70 yields a maximum possible increase of 24 percent.

The average benefit Social Security paid in January was $1,294 — $2,111 for a couple. If your full retirement age is 66, waiting until 70 would grow a $1,294 benefit to $1,708 a month for life. For couples, if both spouses wait to 70, the $2,111 average combined benefit can grow to $2,787 a month.

On the other hand, about half of retirees take Social Security at the earliest possible moment, when they’re 62, locking themselves into a much lower monthly benefit than if they had waited until full retirement age. U.S. News & World Report says:

Social Security benefits are reduced for workers who sign up at age 62, and the amount of the reduction has recently increased from 20 percent for people born in 1937 or earlier to 25 percent for baby boomers born between 1943 and 1954. … The reduction in benefits for people claiming at age 62 will further increase to 30 percent for everyone born in 1960 or later under current law.

This Social Security Administration table shows the reduction in taking early Social Security benefits depending on the year you were born.

Take action:

• Go to SocialSecurity.gov’s My Account to see your estimated benefits. If you’ve paid into the Social Security system, you can create an account and pull up a statement showing what you’ll earn by claiming benefits at various ages.
• Keep your current job if you can and delay retirement. Or get a part-time job that helps you hang on longer before claiming benefits.
• Hire a certified financial planner to review your retirement plan, income, and expenses with you. Find a fee-only certified planner.

For more tips on boosting your benefits, read “13 Ways to Get More Social Security.”

Mistake 6: Forgetting to plan for taxes

The IRS probably won’t disappear from your life when you retire.

For instance, traditional tax-deferred retirement plans like 401(k)’s and IRAs allow you to contribute pretax money to the accounts with the understanding that Uncle Sam will get his cut when you draw from the accounts after retirement. To that end, those accounts require you to withdraw a minimum amount each year beginning in the year you turn 70½. If you don’t, you could be hit with a 50 percent penalty on the amount you should have withdrawn.

There are calculators online that can help you compute required distributions, 

​Good planning, especially before retirement, can help manage the tax bite. One strategy, Stacy Johnson says, is to roll a portion of retirement savings into a Roth retirement plan, which has no minimum distribution requirements. Roth plans require taxes to be paid before money goes in. You withdraw the funds tax-free later. The strategies you use will depend on your income now and what you expect it to be after retirement.

Take action: Make a plan — or get expert help making one — that takes taxable retirement income into account.

Mistake 7: Ignoring estate planning

Get your affairs in order before you’re ill or old so you’ll have control over where your money and possessions go. It’s a kindness to your heirs, too, since they won’t be saddled with the work.

Take action:

• Make or update your will and, if appropriate, make a revocable living trust.
• Sign a durable power of attorney naming someone you trust to make your legal and financial decisions if you cannot.
• Assign health care power of attorney to someone to make your medical decisions if you’re unable.

Learn more from “Estate-Planning Documents You Need Right Now.”

Mistake 8: Investing too conservatively

As retirement grows nearer, it seems prudent to invest more conservatively. But you could live another 20 years. Savings held too conservatively shrink due to inflation. A portion of your funds needs to grow.

“Never taking a risk means taking a different risk,” Stacy says.

Take action: Learn about investing so you can be confident in taking measured risks to earn gains, even as you grow older.

Read “Ask Stacy: How Do I Get Started Investing?”

What money mistakes have you seen retirees you know to make? Post your comments below or on Money Talks News’ Facebook page.

Source: Retiring Soon? Don’t Make These 8 Mistakes