Dec 11
14
Day Five: The 12 Days of Christmas – And the 12 Ways to Plan for Your Financial Future
It’s day five of The Retirement Reality’s 12 Retirement Tips of Christmas. If you missed any of the previous tips, be sure to click here.
Five Golden Rings – Over the years, many Americans have valued their pension as if it were gold. But just like everyone won’t be getting five golden rings this holiday season, many employers are doing away with traditional pension plans. Currently, less than 17 percent of employees will receive income from a traditional pension plan, dropping greatly from the 62 percent that received a pension over 20 years ago. According to the Employee Benefit Research Institute (EBRI), in 1984, 24.2 million individuals had a traditional pension plan. By 2007, that number was 11 million. Therefore, Americans need to look for other retirement vehicles that generate guaranteed income, such as annuities, to support themselves in their final years. You can learn more here.
It’s day four of The Retirement Reality’s 12 Retirement Tips of Christmas. If you missed any of the previous tips, be sure to click here.
Four Calling Birds – As we approach 2012, it may be a great New Year’s Resolution to get all of your retirement planning in order. One way to do this? Call a financial planner to discuss what savings and investment plan may be best for you. One option might be an immediate annuity. Immediate annuities begin making payments right away or within a short time after purchase and are paid over a specific period of time. The payments may be monthly, quarterly or yearly — creating a paycheck for life.
Another option may be a fixed annuity. Fixed annuities are much like bank CDs but from your insurance company. They pay a guaranteed rate of interest. If you are an individual who wants the consistency and predictability of a set payout, then further the exploration of a fixed annuity with a financial planner.
Either way, sitting down and talking to a financial planner about your circumstances is a great way to plan for your golden years.
Three French Hens – Americans may not be asking for three French hens for Christmas, but many are wishing they had the French retirement system. In France, every retired person 
benefits from a Social Security pension which allows them to retire at the age of 65, or earlier. Not that we should take financial advice from the French, but nonetheless, their retirees may have a safety net that American retirees do not. Indeed, the Social Security system in the U.S. is paying out less and less of what is needed.
As we’ve suggested many times on this blog, Americans need to look for other retirement options to fulfill their retirement needs.
It’s day two of The Retirement Reality’s 12 Retirement Tips of Christmas. If you missed any of the previous tips, be sure to click here.
Two Turtle Doves – If you and your spouse want to have peace of mind in retirement, make sure you are both putting money away for your retirement – and seriously consider retirement vehicles that provide guaranteed lifetime income for the ultimate peace of mind. Because of the economic downturn 20 percent of workers have actually stopped putting money into a 401(k), IRA or other traditional retirement accounts in recent years. Come retirement, these retirees will need to manage personal savings so they provide an adequate standard of living for the rest of their lives.
With the holiday season upon us, family and celebration is on everyone’s mind. But what about planning for your retirement? The holidays are a perfect time to review your finances, talk with your family and better plan for the future.
We here at The Retirement Reality have decided to help by providing you with the 12 Retirement Tips of Christmas.
We’ll have a new tip each day, so be sure check back.
A Partridge in a Pear Tree –As the song goes, “On the first day of Christmas, my true love gave to me, a partridge in a pear tree.” Just like the pear tree will need years of close care to ensure it grows, so does your retirement savings. It’s easy to set up the automatic deposit into your company sponsored 401(k) on the first day and forget about it, but that’s not the best approach to grow your financial savings.
If you have a 401(k) or another employee sponsored plan, make sure you increase your contribution each year so you will continue to grow your savings. As you receive pay increases, increase your contribution. 401(k) is a great start – but not enough. You should absolutely look into other retirement savings options throughout the years in order to diversify your retirement income. Annuities and high-interest yielding savings accounts are just two options.
As Americans struggle to recover from the side effects of the economic recession, there is one thing President Obama hopes that workers are able to do: put a little away for retirement. Speaking on the economy yesterday, Obama addressed the crisis levels that Americans are currently facing when it comes to their ability to save. “…What’s at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, secure their retirement.”
Obama’s remarks underline the need for policymakers to seriously examine ways to better help Americans save and plan accordingly for their golden years. Now it’s time to act.
To read the full text of President Obama’s speech, click here.
You can’t sum up the retirement anxiety most Americans are feeling better than USA Today’s Matt Krantz, who writes, “For many Americans, the golden years are quickly taking on a 
tin-like hue.” The decline of the traditional retirement instruments such as pensions, combined with a decade of poor stock performances and a still-depressed housing market, have left many Americans “behind the eight ball” when it comes to retirement preparedness.
Every family’s story is different, and Krantz offers tale both cautionary and inspiring about how Americans are coping in these tough times. Linking all of them, however, is the notion that the demands of ensuring a comfortable retirement have changed. In the past, Americans could rely on Social Security, a pension and a prudent savings plan to see them through. Today, that’s not the case.
Times change, but the fundamentals of prudent saving and investment don’t. Krantz admits that it can be difficult to predict where the economy will turn next, but nonetheless believes that “coming up with a financial plan, at least, allows people to set realistic expectations for what they need to do.” And, as in many things, variety is crucial. A diverse financial plan – one that draws from a mix of retirement benefits, investments, and fixed-income vehicles like annuities – is the most likely to ensure a comfortable retirement, whether the economy is bad or not.
‘Tis the season! Christmas is the season of giving and enjoyment of family. It’s also possibly the most commercialized holiday with families spending hundreds of dollars every year on a single holiday. According to a Gallup surveynearly 25 percent of Americans “plan to spend at least $1,000 on gifts” and another 25 percent “say they will spend between $500 and $999.”
Often times, families are tapping into their savings in order to cover the extra costs associated with the season. So this holiday season challenge yourself to get more practical with your gift giving (even to yourself) by setting and sticking to a budget.
With the 401(k)s declining and pensions becoming a thing of the past, the time to be more conservative with holiday spending is right now. What’s more, when making those purchases think about the benefit of making a contribution to a loved one’s retirement fund. It could be in the form of CDs, savings bonds, or even a hired financial literacy consultant. Hundreds of dollars worth of gifts sound great but hundreds of dollars saved towards retirement sounds better. Such a gift screams out love, care, thankfulness and gratitude. All of which are the season’s greatest principles.
Here’s the good news, even in the midst of a downturn, America remains the most prosperous country. Our economy is the world’s largest and most dynamic, and our workers, if they save and invest wisely, will still ensure that they retire in dignity and comfort.
The bad news, according to a new Fidelity survey, is that even America’s most educated citizens lack such a prudent approach to retirement. TIME’s Dan Kadlec reports, “fewer than one in four [higher-educated Americans] have a formal investment plan for their retirement.” Indeed, “more than half in the Fidelity higher education survey consider themselves beginners at investing; 63% say they are concerned they will not be able to retire comfortably.”
Kadlec believes that the problem begins with our education system itself, writing that “if saving and investing issues confuse even the well-educated, it should be apparent that our schools are failing us in an important way. We need financial education to be part of the school curriculum.” We couldn’t agree more, but it’s also important to note that school isn’t the only place to learn financial literacy. In today’s dynamic, unpredictable economy, Americans should strive to learn more about investing at every stage of their career.
Retirement a fairy tale? Forbes seems to think so. Just like Santa Claus, the reality of retirement is that it may be a fantasy. “When it comes to retirement…sooner or later you’ll have to admit
that the plans you had for your golden years, as you’ve been programmed to imagine them, can’t really exist.”
Gone are the days of pensions and traveling in retirement. Instead, hopeful retirees face years of saving on their own to afford the golden years they’ve always dreamed of. But, just as we still cherish the thought of Santa Claus, it’s never too late to turn your make-believe retirement into reality. Hopeful retirees are staying in the workforce to continue saving, while others are turning to annuities to guarantee themselves a steady income in retirement. No matter what the option may be, the chances are out there to succeed in retirement. And if you’re feeling lucky, you can always ask Santa Claus to help out with your retirement savings.