In the words of Malcolm X, “the future belongs to those who prepare for it today.” According to the Centers for Disease Control (CDC), average life expectancy at birth for all genders in the United States has been on a general climb since the turn of the century. For instance, life expectancy at birth in the 1970s stood at 71 years, with adults at the age of 65 expected to live for at least 15 more years on average. Fast-forward to 2015 and life expectancy at birth had changed to 78 years, with adults at the age of 65 expected to live for 19 more years on average. As time goes by, people in general are living longer because of advancing healthcare, lower crime and access to mass-produced food. This might sound like good news but the truth is that living longer, especially in the current economic order, presents everyone with a serious dilemma.
Inasmuch as life expectancy has been on the rise over time, individual financial stability has followed an opposite trend of decline. This is because more than ever before, household debt either matches or surpasses disposable personal income. Consequently, a significant number of people face difficulty either building up or maintaining substantial savings. According to the Economic Policy Institute (EPI) so many people are grappling with debt that nearly half of all families in the US have no retirement savings at all. All of this means that people may be living longer, but their prospects of living comfortably beyond retirement is being jeopardized by the challenges of financial management.
Despite this dilemma, it is still possible to prepare adequately for retirement. With the right determination, initiative and discipline, most people have what it takes to make up for lost ground, if any. The most important thing is to actually make a firm decision to commit to responsible financial management – the earlier the better. If getting ready for retirement hasn’t been something you’ve thought about in detail, here are a few tips to help get you started with this undertaking:
Start Saving Now
Regardless of your sources of income, or whether you have an employer that is willing to fund a retirement plan, modify your spending habits in order to regularly allocate some of your net cash towards savings. Even if these savings aren’t initially banked in a retirement account, cultivating a mindset that instinctively apportions some of your income towards savings makes it easier to exercise discipline over these finances as they grow over time. Mathematically speaking as well, the earlier a person begins to save money, the less net income they have to sacrifice. For instance in order to save up $250,000 by the age of 65, someone 20 years old would need to set aside $462.96 per month without fail for 45 years. Conversely someone 40 years old would need to set aside $833.33 per month without fail for 25 years. Getting a good head-start clearly creates an advantage, but! consistency is key. Saving out of habit is the only way to get the ball rolling in terms of readiness for retirement.
Calculate your Cost of Living and Prioritize Necessities
Adequate preparation for retirement demands comprehensive awareness of spending. This doesn’t just apply to spending at present, it’s also important to try and develop an accurate idea of exactly what expenses will likely become necessary as one approaches old age. Because different people lead different lifestyles, there is no standard cost of living that can possibly apply equally to everyone. Try answering the following questions in order to generate reliable estimates:
· How many years do I have left until retirement?
· How long do I expect to live after retirement?
· How much money do I currently need per month to make ends meet?
· How is this monthly amount going to change by the time I’m ready to retire?
· Based on how long I expect to live after retirement, how much money will I need per month to make ends meet, and how much does this translate to annually?
· What specific steps can I take to generate these estimated amounts in good time?
While calculating these estimates, it’s also important to take into consideration that medical expenses typically increase for people as they get older. In addition to budgeting for routine cost of living therefore, factor in a cushion for medical expenses as part of your retirement savings.
Learn how to Use and Capitalize on Financial Services
Saving for retirement isn’t a one-man-mission. While it’s prudent to start this process out of one’s own initiative, it’s important to know that there are various resources out there that facilitate preparation for retirement. Some of these include:
· Employer Retirement and Pension Plans
· Individual Retirement Accounts
· Social Security Retirement Benefits
· Federal Insurance for Private Pensions
· Investment in Securities to maximize Interest Revenue
Most banks and specialized financial institutions are more than eager to provide advice on how to take advantage of these and many other monetary resources available to consumers. As easy as it is to find a helping hand on this issue, it’s also very important to exercise caution before entrusting other parties with your hard-earned money. If you’re going to pay someone for investment advice, make sure to get a guarantee in writing that they are a fiduciary investment advisor. Fiduciary advisors are professionally obligated to work in the best interests of the individual consumer who pays for their counsel.
However long it takes, be consistent and be realistic. Saving up for retirement is like running a marathon. The finish line may seem out of reach at first, but persistence is the only way to ever make it across. Never stop saving, never stop planning, and when the time comes, you will never stop thanking yourself for preparing for the future. Check out more of RISE Programs’ Blogs for helpful advice on business and remember to spread the word by sharing this post.