I have had Posts on Retirement Planning before however, I believe that a Consistent, Rational Plan is always something that everyone should be reminded of–and get started on. This should be an especially important topic for anyone over age 50, and incrementally more so as workers get closer to their Retirement Dates. It is, however, never too soon to start.
For some, the Planning might be one of those things that they are always going to “get around to”. The earlier one starts, all the better. Keep in mind that, in the early years of a Marriage, “things” can just seem to get in the way. The New House and Mortgage, Children, perhaps job changes, paying-off student loans, etc. can all get in the way. That is all the more reason to start saving early, get into the habit, and if you need to, you can always re-start your Saving, if sidetracked and, at least, already have a head start, as well.
For employees who have a Company-Sponsored Plan, make sure that you, at least, contribute enough to take advantage of Matching Funds, if any. 401(k)s often have provisions where participants can take loans against their balances-generally from their own money–as long as the Plan provides for it. That could mean easier borrowing options when bank loans dry-up. And, generally, you will be paying the interest to yourself.
Although the term Boomers is is often thrown around quite frequently, it specifically pertains to people born between 1946 and 1964. Sometime after you reach Age 50, you may notice that you are receiving more solicitations from the Insurance and Securities Industries. People who deal in Money are most willing to help you invest yours. Hence, they are committing Tons of Money toward attracting the very largest Demographic Segment of the US Population. (See earlier Post: Choosing a Financial Advisor (FA).)
I have read various estimates of the size of the Average 60 Year-Old’s Retirement Nest Egg–ranging from $114,000 to $155,000. Either way, that would hardly be enough for most people; that is, unless you will be receiving a very substantial Monthly Pension Benefit. Keep in mind that Pensions are often not in the Future for most Retirees these days. Also, if you still have a Home Mortgage or your Children have moved back-in; then, you will be especially behind the proverbial eight ball.
A reason why many people are behind in their Retirement Plans is the fact that we have had two significant Bear Markets over the past decade. Of course due to The Great Recession (from 2007-2009), when the Dow Jones Industrials dropped by more than 50%, many forget the one in the early 2000s, when President George W. Bush led the Country into two Unnecessary Wars. Now, that leads me to two different forms of risks that some people in their 50s and 60s take.
When we entered into the Recent Financial Melt-Down, just after Lehman Bros. went Bankrupt (Sept. 15, 2008), many investors panicked and shifted their 401(k)s, IRAs and other accounts into Cash, and many just left it there. Others have chosen to take un-due risks, such as in Day-Trading. Day-Trading is constantly moving money back-and-forth, between individual stocks, mutual funds, options and Cash.
Generally, neither of those strategies will be successful. Sitting in Cash, earning 0.25% to 1.00% will never keep up with Inflation. Day-Trading can mean merely generating additional commissions for the securities firm and how do you know that moving your money, from “X” to “Y” is the right move?
Normally, it is best to Have an Investment Strategy, perhaps modify it from time-to-time, and stick to your Plan. When the Markets get dicey, perhaps shift some of your assets into Cash, move a bit more into Bonds and consider adding some Defensive Securities (Health Care, Consumer Staples (Necessities), Utilities, etc.); but, stay engaged and in the Market. If you work with a FA, have them review your 401(k) or other Company-Sponsored Plans, as well.