What’s Your Retirement Plan?

A recent study by Transamerica’s Center for Retirement Studies concludes that for a large portion of folks, “never retiring” is their plan A. Alas, a significant percentage of the eager-to-keep-working population is unprepared with a plan B in case they find themselves involuntarily removed from the workforce. And as Catherine Collinson, President of Transamerica’s Center for Retirement Studies points out, “Planning not to retire is simply not a viable retirement strategy.”

Here are the three stats from this extensive TCFRS survey that struck me smack in the gut. I’ll follow them up with some action steps that you can take to make yourself a role-model for preparing for the new retirement realities.

  1. American workers estimate their median retirement savings needs at $600,000. Unfortunately, a mere 30% currently have over $100,000 saved in retirement accounts. With a $600,000 nest egg, you could withdrawal $24,000 a year (based on the 4% rule). Add to that Social Security which right now could run from say $13,000 – $23,000 a year depending upon your household composition and work history and you are looking at retirement income in the range of $37,000 to $47,000. That works.  But at a level of savings below $100,000 you are looking at something closer to $22,000 in annual retirement income (using midpoints). Ouch. Not nearly as pretty of a picture.
  2. Just 9% of workers frequently discuss saving, investment, and planning for retirement with family and friends. This topic is the massive pink elephant in the room. If you are not talking about it, you are likely not taking action steps toward preparing yourself for it. Would you expect your kids to make wise career decisions if you never talked about the subject with them?
  3. Only 10% of workers have written out their retirement strategy. Would you attempt to build a house without plans and blueprints? Of course not. The same goes for you retirement planning. A little advance preparation can go a long way.

So yada, yada, yada – you might very well be thinking. What the heck, Manisha, can I actually do about this in MY LIFE TODAY?  Here are my top 3 tips for you, inspired by Catherine Collinson’s extensive and excellent work on the topic.

  1. Teach yourself to financially fish. Just like you seek out an expert guide with your physical health or your spiritual development, commit to educating yourself about the basics.  You can take the inexpensive online financial literacy course I offer, Money Rules… For Women (meant literally & figuratively) for $39… or go to your library and read one of the many wonderful personal finance books and magazines available. One of my favorite’s is Michael R. Piper’s CAN I RETIRE? I also strongly recommend reading Mark Miller’s wonderful blog, Retirement Revised. Two websites I love with great retirement calculators are EBRI’s Ballpark Retirement Calculator and FIREcalc’s.
  2. Participate! If your workplace offers a 401k, 403b, or 457 plan – contribute the max you can afford.  And if not offered, remember you can open up an IRA on your own at the financial institution of your choice. While participation rates are creeping up, 1 in 5 eligible employees still are not participating in the valuable employee benefit.
  3. If you are over 50, take advantage of catch up contributions & consider intergenerational or multi-inhabitant households. For many people over 50, the math of a the “traditional” retirement just doesn’t work.  And if you have loved ones – and especially young working women in your lives – please share with them this recently released data from a Capital One survey which disturbingly shows recently graduated young men are kicking our female toushies when it comes to higher saving rates, increased use of mobile/email alerts, and regularly checking credit reports. These are key steps for 20, 30, and 40 somethings  – and especially women – to take to avoid much of the potential pain heading the way of baby boomers (see my last post on The 77/11 Effect and the implications for working women).

What about you – do you talk about retirement planning in your household?  Do you have any tips to share with fellow readers about what has worked well for you?  We’d love to here your thoughts!