My retirement journey started as most peoples; on Google, with questions like...
“How much do I need to retire?”
“How much should I have saved by age __?”
UPDATED: May 7, 2018 - After weeks of tedious overwhelming research, I decided to share the details of my research in an easily digestible infographic. Retirement savings is a personal journey and strategies can vary widely depending on what stage of life individuals are in.
Although Millennials, Generation X, and Baby Boomers are all trying to accomplish the same end goal, they are going about it in different ways and each generation is struggling with its own unique problems.
Being an adult has a laundry list of responsibilities. Preparing for your eventual departure from everyday work life always is included on this list but often times get less attention than it deserves due to unexpected life events or temptations of shiny new objects.
It should not be a surprise then that three in ten Americans report feeling stressed both mentally and emotionally about preparing for post-career life. The topic of this kind of financial preparation should not trigger a mild panic attack.
Instead of panic attack, check out these easy to follow tips to make sure your future you can live in the moment and also be saving for the future.
Risky Solution To Lack Of Savings
Though the different generations may not agree on spending habits and saving goals, the majority of Baby Boomers, Generation X and Millenials as a whole agree that, despite their best efforts, the only way they feel that they can achieve a comfortable lifestyle after retirement is by continuing to work. Now, while this may be a disappointing conclusion for many, it does come with some benefits.
For those that decide to retire before full retirement age and make more than the yearly earnings limit, $1 will be deducted from your monthly benefit payments for every $2 you earn above the limit until you reach full retirement age.
For those who are of full age and want to continue to work, you can get your full monthly benefits without a limit on your outside earnings. This can be extremely beneficial for those that want to really beef up their savings quickly. If budgeted properly, you could potentially live off of your monthly benefits and put 100% of your work earnings into your retirement savings for future years.
If you decide to keep working for your 401(k) sponsoring employer after full age and don't redeem any of it, you can continue contributing to that for as long as you'd like as well.
Though this may sound like a reasonable solution to some, there are quite a few drawbacks:
- The risk of age discrimination is much higher. Only 1/5 Americans aged 65 and above were employed in the year of 2016, according to the Bureau of Labor Statistics. It's possible, though, that this was because the majority of the generation of that age during 2016 did not find it necessary or appealing to work at that point in there lives and chose to fully retire instead.
- Less than half of all generations are admitting to not keeping up with job skills and only 18% are scoping the job market to continue seeing what's out there. If skills are not kept up, more qualified candidates will be chosen.
- 47% of workers in all generations are simply guessing at their financial needs for post-retirement and don't have a well-researched plan. Even more worrisome is that only 7% used a retirement financing calculator when coming up with what they thought they'd need for savings.
- Those that are expecting and anticipating working post-retirement are taking a big risk, as unexpected health issues could come up, forcing them into retirement. If such a thing were to happen without being fully financially prepared, the results could be disastrous.