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William J. Lynott The Hard Truth about Retirement T


HE simple reality of re- tirement in America today is this: anyone who wishes to retire comfortably has to save substantial amounts of money starting at a relatively early age, and, of course, the earlier a person starts, the bet- ter. This reality is not a secret; financial advisors have been tell- ing people this for many decades. But a surprising large number of Americans just aren’t facing these facts.


The twenty-second annual sur- vey on retirement preparation, which was conducted by the Em- ployee Benefit Research Institute, paints a clear picture of an Ameri- can public that is not preparing for retirement. Here are some of the unfortunate findings of their 2011 survey:


Only 59 percent of working- age Americans say they are cur- rently saving for retirement, which is down from 65 percent in the 2009 survey. And of those work- ers who are saving, more than half report that they and/or their spouse have less than $25,000 in total savings and investments, excluding their home. Less than half of the workers surveyed have made any effort to calculate how much money they are likely to need in retirement, and a whop- ping 27 percent of workers say they are not at all confident about having enough money for a com- fortable retirement.


10 Except for a cash reserve to cover


expenses in an emergency, put as much money as you possibly can into a 401(k) or standard IRA every year.


Why Is the Picture so Gloomy?


One of the more obvious rea- sons why these numbers look so bad is today’s difficult economy. Many people have faced real fi- nancial hardship due to unem- ployment, reduced hours, medi- cal expenses, or their ruined investments. Even people who have remained steadily employed have the feeling that there is no money left for savings after pay- ing all their bills.


These harsh circumstances


are sometimes accompanied by a paradoxical complacency about the future. Some experts sug- gest that because Baby Boomers see their parents getting along well in retirement, they somehow assume that they will be able to do the same.


But today’s working-age people have a tougher job preparing for retirement than their parents. The phasing out of defined benefit pension plans and today’s longer lifespans mean that not only do people have to accumulate their own savings rather than rely on a defined income throughout their retirement, they also have to live


on those savings longer than pre- vious generations would have. Certified financial planner Carl J. Kunhardt sums up the situa- tion this way: “If you hope to enjoy a comfortable retirement, you’ll have to arrange for it your- self. No one else is going to worry about your financial health in re- tirement. If you don’t take care of it yourself, it won’t happen.”


What You Need to Do If you want to take charge of


your financial future, these steps are essential:


Start Immediately Whether your retirement is years away or just around the corner, you need to act now. The sooner you take concrete steps, the more likely it is that you will meet your financial objectives. Starting early is a huge advan- tage, but regardless of your age, it is essential that you take im- mediate action.


Pay Yourself First


If you are like most people, it won’t work for you to put savings aside only after you have taken


care of all your other needs. If you follow that philosophy, you all but guarantee that there will never be anything left to save. So, always remember to pay yourself first.


Decide how much money you intend to save each month and put that money aside. What is left is what is available for you to live on.


Let Uncle Sam Help Except for a cash reserve to


cover expenses in an emergency, put as much money as you pos- sibly can into a 401(k) or stan- dard IRA every year. Contribu- tions to these tax-deferred savings vehicles not only build your financial future, they are tax deductible in the year in which you make them.


If you participate in a 401(k) plan through an employer who offers a full or partial contribution based on your contribution, you should make every effort to at the very least contribute enough to get the maximum contribution offered by your employer. Em- ployers’ contributions amount to “found money” that you cannot afford to pass up.


Another possibility is to con- tribute to a Roth IRA. While these contributions aren’t tax-deduct- ible, the withdrawals that you will make after retirement will be tax- free. The choice between saving (Continued on page 56)


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