For our generation retirement is turning more and more into a elusive dream. Many people are having to work well into their golden years wondering where they went wrong.
Back in the day retirement functioned on a 3-legged stool. First leg was a company provided pension. Joe Smith works for Sierra Pacific for 30 years, and when he retires Sierra Pacific pays him $1,500 a month for the rest of his life. It was a pretty sweet deal, however since the 80’s fewer and fewer companies provide these. In 2010, 3,500 jobs still had pension plans in the United States, most of which were government jobs. So, for us millennials this leg is gone.
Second leg on the stool was social security. Uncle Sam takes a piece of your paycheck every month, keeps it in the Social Security Trust, then when you retire he pays it back to you. When FDR created S.S there were 60 workers for every retiree, and the funds were strictly for retired people over 55. 20 years later there were 40 workers for every retiree. Present day there are 3 workers for every retiree. This would not be a problem if the S.S trust would have been managed properly. But, alas that didn’t happen. All of the sudden when the government was running low on money they noticed a huge surplus of cash in the S.S.T and began “borrowing” funds from it and paying the money back with I.O.U’s. Which means they took -quite literally- trillions of dollars out of the SST and never paid the loans back. Economists are predicting the crash of S.S to occur in 2035, if not sooner.. We’ll only be in our 30-40s, nowhere close to retirement age… I guess this leg is out from under us too.
So what’s that leave us with? Our third and final leg, personal savings. That’s right its all on us to stockpile a ton of money away in smart investments to fuel our golden years. The good news is we have compounded interest on our side. Bad news, we start life after college with huge amounts student loan bills, and a thirst to live the good life right away. Don’t get caught in that net. Delayed gratification is the way to financial success.
When you leave college live modestly and below your means. Keep away from expensive car payments, pay down student loans quickly, and begin your retirement investing no later than 25.
A solid strategy to begin with. Really, you should save and invest 15% of your paycheck. But start with 5% and adjust accordingly. If your employer matches a 401(k), this will save you some money in the short run on taxes and build a stockpile of cash. However, only invest as much as your employer matches, if they do not match, don’t invest. Take an Indexed Universal Life Policy and max fund it, IUL’s are the only way to build tax-free income for retirement, and are an invaluable part of a retirement strategy. Then once your income increases there are more ways to diversify, but for now stick to the basics.
jpratt68 