Too many people think retirement planning is simple. Then years
later, they find they don't have enough money to retire on. How did
They think you just throw some money into a savings account,
with little regard for the account's tax status, and put little
thought into the investments. After all, the market always goes up,
right? They assume if they save X amount of dollars today, then
they should be fine 10 or 30 years down the road.
Studies show that many Americans plan this way. An
New York Times
by Teresa Ghilarducci, an economics professor at the New School for
Social Research, points out that "75% of Americans nearing
retirement age in 2010 had less than $30,000 in their retirement
But how could this be? They must have been saving a portion of
their paychecks each year and trying to put in at least something
into a 401(k) or individual retirement account most years. What
The problem: Many Americans - and their financial advisors -
never address the factors that are critical to planning for
retirement, Naïvely, they assume that some simple math on the back
of an envelope is sufficient to come up with the final account size
necessary to survive in retirement in say 30 years. They think they
did their job and can cross off retirement planning from the to-do
To make that kind of calculation, you need a crystal ball to
tell what inflation (or deflation) will be each year leading up to
and during retirement. The crystal ball must also be political
savvy, able to foresee future tax bracket and retirement account
changes. No one, of course, can augur what lies ahead.
There's a reason, according to Ghilarducci, that 49% of middle
class workers will be living on a food budget of nearly $5 a day
during retirement. What makes this looming disaster unfortunate is
that it is so preventable.
Retirement planning is a process that you must review
continuously during the journey to retirement. Part of it is
preparing for the unknown. Potential roadblocks abound. You may
have a health issue, which impedes your working and saps your
earnings power. A son or daughter may lose a job and need to move
back with you, or require a chunk of money to get out of a jam. The
result: You must move back the age at which you can retire.
Everyone should be prepared for retirement. Don't let poor
planning lack of planning, be what destroy your retirement
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Joseph "Big Joe" Clark, CFP, is the managing partner of the
Financial Enhancement Group LLC, an SEC Registered Investment
Advisory firm in Indiana. He teaches financial planning at Purdue
University and is the host of
Consider This with Big Joe Clark,
found on WQME and iTunes. He is a Registered Principal offering
Securities and Registered Investment Advisory Services through
World Equity Group, Inc, member FINRA/SIPC. Big Joe can be reached
or (765) 640-1524. Follow him on Twitter at @Big Joe_Clark and
on Facebook at
Securities offered through and by World Equity Group Inc.
Member FINRA/SIPC. Advisory services can be offered by the
Financial Enhancement Group (FEG) or World Equity Group. FEG and
World Equity Group are separately owned and operated.
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