ATHENS, Ohio – You’ve heard the adage, “Pay yourself first.” But how many of us do it? Will the average American have invested and saved enough for retirement?
About 71 percent of respondents to a recent nationwide survey conducted by Scripps Howard News Service and Ohio University say they are either very confident or at least somewhat confident that they will spend all of their retirement years in financial security.
Dena Wise, University of Tennessee Agricultural Extension Service financial-management specialist, expresses doubt.
Ready for retirement?
“Research studies don’t bear this out,” she said. “In fact, depending on the standard used, researchers estimate that up to 60 percent of the population are not financially prepared for retirement.”
According to the U.S. Department of Commerce, the personal savings rate in this country fell to minus 1.2 percent in 1999, which was the lowest in 59 years.
“I think that’s probably right,” said Wise, “because we’ve seen both credit and bankruptcies skyrocket the last few years. People are consuming, consuming, consuming.”
Time is money.
Suze Orman, financial expert and author of The 9 Steps to Financial Freedom, said the most powerful and respectable way to make money is to invest the money you save during your working years wisely so that when you no longer want to or are able to work, your money will work for you.
Eighty-three percent of respondents to the Scripps survey said they or someone in their household are covered by a pension plan, have a 401(k) plan through the workplace or have an Individual Retirement Account (IRA). But will it be enough for retirement?
Wise likes to see people saving 10 percent to 20 percent of their income.
“It could be the part of their retirement that goes into a match by their employer, something that goes into a 501(c)3 or a savings account that’s invested,” she said. “This doesn’t all have to be tax-sheltered savings.”
Financial gurus concur: Time is the most important factor in money’s growth process.
Start saving now.
If you’re 45 and start putting $100 a month into an account that averages a 10 percent return, you’ll have $71,880 by age 65.
If you start 10 years earlier, at age 35, your $100 a month will have grown to $206,400 by age 65.
If you can start saving $100 a month at age 25, you’ll have $555,454 by age 65.
“For every year you wait to take the step of establishing respect for your life, it costs you about $25,000 a year in future growth,” said Orman.
Wise fears that the baby boomer generation may have to experience hard times in retirement before younger generations take heed and adopt sound saving habits.
“Retirement slips up on people,” Wise said. “They think they’ll deal with this in the future. Then time passes and it’s suddenly there.
“The other thing that complicates the picture is that there’s a really short time between the time people have peak expenses in their life.
“Those peak expenses usually come during the years when their children are in college and retirement. So I think people start planning too late.”
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