Financial Advisors will tell you that in order to be able to have a relatively comfortable retirement, you’ll need to save your money in a systematic manner. They will caution that to do so requires you have a plan, i.e., you just cannot leave it to chance.
Despite the exhortations of advisors and/or those ubiquitous talking heads on television, most folks tend to block out the message or simply throw up their hands in surrender to their belief born from some experience, that saving money for retirement, in today’s economy, is at best a specious hope.
In today’s environment, where so many Americans are looking to Washington for an answer or a ticket to be able to step up to the trough, it is indeed an unacceptable effort on their part to take some initiative for their future financial survival. This seems to be a generational malaise.
The so-called Baby Boomers, i.e., those folks born between 1946 and 1964, were given much, but apparently not asked to give much back in return. That generation has been referred to as the “me too generation” – a pejorative term born from their behaviors. All 70 million of them are rapidly approaching retirement. The trough, which they aspire to step up to, is now shallow and getting narrow.
Current retirees, those receiving Social Security Income Benefits, have sadly come to realize that they cannot survive financially without another steady source of income. That’s one of the key reasons many folks over 65 are still working; albeit, not at the jobs they held previously, for so many years, but working at jobs which have little, if any, educational requirement for which was requisite in their past careers.
However, quite a few forward looking Americans believed that, in order to live a comfortable retirement, they needed to save as much money as possible.
Whether they hired a Financial Advisor or felt they were capable of doing it themselves, they sat down and literally identified their financial objectives and goals. These wise souls did not see this activity as so-much dreaming as they did in the belief that reasonable thought and future planning were requisite activities. Writing down the goals is only the beginning.
After the list of financial goals had been agreed to, then these folks would take the second step: prioritize the goals. Once the list of goals had been prioritized, then they set out to devise a plan to actually achieve those goals. Here is where it can become tricky.
Regardless of the goals or the plan, it means systematically saving money. Whether you put your money in a savings account or an aggressive growth stock mutual fund depends upon your tolerance for financial risk, patience, percentage of income available for savings and/or your time-frame available until retirement.
As important as goal setting and planning are to achieving a comfortable retirement, an honest assessment of your tolerance for financial risk and patience are extremely crucial to your success. Many retirement plans were severely stung, beginning in 2008, when the stock markets went retrograde. Those who did not panic, have recovered. Those who did not understand the historical behavior of the stock market (it goes up, down and up), pulled their investments from the market and validated their paper losses.
If your tolerance for risk is low, e.g., 1 on a scale of from 1 through 10, then saving your money in an IRA savings account is appropriate. Bear in mind, such an account provides for very slow growth; nevertheless, safe.
If, however, you should discover that your tolerance is higher (most folks admit to 5), then you may find comfort in saving in mutual funds, e.g., a combination of high-grade corporate bonds and stocks. Some advisors recommend a 60/30 split, i.e., 60% bond, 30% stock; with the remaining 10% in cash or cash equivalents. Keep in mind, markets go up, down and up. It can become nerve racking at times. Be patient: the average annual growth of the Standard & Poor’s 500 has been around 8% - over the past 80 years.
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