In evolution, species demonstrate the ability to survive by
adapting to their conditions. Anyone trying to save for retirement
today would do well to adopt the same type of pragmatic
Retirement planning should start with a long-range plan, but you
can't simply lock into a plan and assume everything will work out
fine. Just think about some of the unexpected curves that have been
thrown at people on their way toward retirement in recent
- Before late 2008, one-month CD rates had averaged 6.4 percent
historically, and had never dropped below 3 percent. Now, those
rates are just 0.16 percent, and have been below 1 percent for
- Stock prices climbed by 188 percent in the 1980s, and by 324
percent in the 1990s, but have risen just 17 percent so far in
- Inflation has averaged 4.15 percent a year over the past 50
years, but over one 10-year period -- December 1971 through
December 1981 -- it averaged 8.62 percent, or enough to reduce
the value of a dollar to the equivalent of 44 cents in the space
of a decade.
These are just a few of the surprises that have required people
to adapt their retirement plans to changing conditions.
Coping with uncertainty
Given the types of unexpected turns described above, how can you
adapt your retirement plan to stay on track? Here are some
Don't invest passively.
Historical returns for asset classes and investment products are
worth knowing, but they can't be counted on. Your approach to
and individual investments should be based more on current
conditions than past history.
Put your bank on trial.
Once you pick a bank that offers competitive savings account
rates, CD rates or money market rates,
don't let that bank take you for granted
. Keep track of the rate you are being paid, and regularly
compare that with other bank rates to make sure your bank is
Manage your career.
As important as it is to make the right investment decisions,
your nest egg starts with your job security and earning power.
Understand that the job market is competitive, and it takes
effort to keep up with the competition. Keep your skills
up-to-date, and always be sure you can identify how you add value
to your employer's organization.
Be prepared to work longer.
With people living longer, it makes sense that their careers will
have to last a little longer as well. This will not only allow
you to save more, but it will cut down on the uncertainty of
retirement planning by shortening the period for which you have
to plan. If you don't think you will be physically or emotionally
able to prolong your current career, think about possibilities
or part-time work so you can make a change without cutting off
your income entirely.
One of the worst mistakes people make is failing to downsize
their spending until it is too late. Do what you can to maximize
your earnings and investment returns, but if the results are
below your expectations, you need to adjust your budget
immediately or you will burn through your money too fast.
All of this boils down to staying engaged in your retirement
planning so it can evolve as conditions change.