Even though the majority of Baby Boomers view retirement as a crisis, few understand how much retirement savings they’ll actually need and what they need to do to get there.
To make sure you’re on track for a secure retirement it’s important to understand your retirement savings plans and set goals. When creating a retirement savings plan, it’s important to decide how much you need to save and when you need to save it by.
For example, for nearly 100 years, U.S. inflation has increased approximately 3.21 percent a year. At that rate, prices double every 22 years. As a result of compounding, that means an item you bought at the age of 20 will be 4 times as expensive by the time you retire.
While there are no easy answers to retiring in comfort, investors do have retirement options that can help increase income and reduce market risk.
When it comes to creating an investment strategy, there are many things to consider. Getting back to the basics, there are four points that everyone must accomplish to get the biggest bang for their buck. 1. Reduce Credit Card Debt While many might not consider reducing credit card debt as an investment strategy, it clearly is., the reason being that you are paying a very high interest rate on that debt. It is not easy to generate massive returns in the stock market, so if one’s credit card interest payment were 20%, one would need to generate a bigger return than that in the stock market to justify not paying off that debt. Reducing or eliminating unnecessary credit card debt is an easy initial step to ge ... Read More
“What should you do when the house isn’t in order?” A good friend of mine asked this question back in 2011. At that time, key stock indices were plunging lower due to issues regarding the U.S. debt ceiling. There was uncertainty, and many wondered what would happen next. I remember this question now because the key stock indices nowadays are falling due to troubles in the emerging markets and there seems to be panic—similar to what we were experiencing when I first heard this question. When key stock indices are declining, instead of panicking and selling ... Read More
Half of the U.S. workforce is partying like its 1998—and not in a good way. According to the Social Security Administration, the median wage in the U.S. in 2012 was $27,519.10, marginally better than 2011’s median wage of $26,965.43. That said, the median wage remains virtually unchanged since 1998, when the median wage was $27,519.55 when adjusted for inflation. So actually, you made $0.40 less in 2012 than you did in 1998. But I digress. The report shows that more than half of Americans earned less than $30,000 in 2012. Incredibly, 15% of working Americans to ... Read More
Are the long-term retirement plans of working Americans being held hostage by the Federal Reserve? If the point of quantitative easing was to stave off a recession and spur jobs growth, I think it’s fair to say the Federal Reserve’s $85.0-billion-per-month money-printing scheme has been a failure. At the very least, I’m not so sure the money was well spent, and that the end does not justify the means. I enter as evidence almost $4.0 tril ... Read More
One of the basic rules that investors should follow when it comes to portfolio management is to not have a bias. What biases eventually do is either hinder investors from making better decisions or cause investors to not even recognize an opportunity that can take their portfolio to new heights. For example, take the Affordable Care Act, more commonly referred to as “Obamacare.” A friend of mine, who is saving for his retirement, has a bias when it comes to this topic. He says it’s not worth it for Americans, and it’s just another expense to add to the budg ... Read More
Many dream about being self-employed; being their own boss, and making their own hours. But, being self-employed also means being responsible for your own retirement savings. Unfortunately, many self-employed Americans seem to have forgotten this or have maybe simply chosen to ignore it until a later date. That could be a costly mistake. At present, only 50% of the U.S. workforce is covered by an employer-sponsored pension plan, unchanged over the last three decades. Furthermore, 71% of small businesses with fewer than 25 workers do not sponsor a retirement plan. (Source: Lichtenstein, J., “Financial Viability and Retirement Assets: A Look at Small Business Owners and Private Sector Workers,” U.S. Small Bu ... Read More
Even at the best of times, saving for retirement is not an easy task. Throw in economic uncertainty and low savings rates, and the idea of a well-fortified retirement plan can simmer away on the backburner, undisturbed for years. This may be a taste of things to come when you consider that Americans are retiring earlier, living longer, and saving less. A recent report shows that the confidence of Americans in their ability to retire comfortable is at historic lows. Just 14% are “very confident” they will have enough money to live comfortably when they retire; on the other end of the scale, 23% say they are “not at all” confident. (Source: “The 2012 Retirement Confidence Survey; Job Insecurity, Debt W ... Read More
“I think it’s all about taking risk; you have to take more of it—get out of your comfort zone. You can’t just keep doing the same thing and expect different results—it’s that simple.” These were the exact words from my friend, Mr. Speculator, on portfolio management. “I am not looking for just a menial 10% return,” he added. “I am in it for a much bigger gain. To gain more, you have to risk more.” Mr. Speculator is right about one thing: to ... Read More
A growing number of American retirement nest eggs are cracked, and the fault lines are getting bigger. While the S&P 500 and Dow Jones Industrial Average are enjoying record highs, the same cannot be said for the employment rate. In fact, stubbornly high unemployment and underemployment mean a growing number of Americans have had to dip into their retirement funds—and sacrifice their future stability—just to get by. While the official U.S. unemployment rate sits at 7.4%, the U.S. Bureau of Labor Statistics reports that the underemployment rate—those who are unemployed, want work but have stopped searching, or are working part time because they can’t find full-time work—remains stubbornly ... Read More
Simplicity still prevails when it comes to investing for the long term—namely, saving for retirement. My good long-time friend, Mr. Speculator, disagreed with me on this statement while we were having a debate about simple versus complex investment management. “You see, gone are the days when it worked,” he said. “Markets have changed. To manage their retirement savings ... Read More