Unreasonable Retirement Dreams
What Are Your Retirement Dreams?
If your vision of your retirement years was to live it up and start your life of luxury so to speak, you might want to rethink that vision. Years ago that may have been possible because retirement meant the end of your financial worries and the beginning of rest and relaxation. Those were the good old days; nowadays, you may need to be a bit more practical about your retirement dreams. Prior generations had guaranteed streams of income; social security checks supplemented by guaranteed pension checks. This guaranteed flow of retirement income eased financial worries thus allowing for more extravagant lifestyles during retirement. We do not have those plush guarantees anymore. Pension plans are becoming extinct and outdated and social security checks do not provide enough income to live on.
Never Give Up On The Dream, It’s Still Possible
If you have the perfect retirement vision, keep that vision in-play, never give up on your dreams.
The drop in retirement plan values has forced many people to give up and believe that retiring may be an impossible dream. But it’s not. If you really want to achieve your retirement goal some day, skip the emotions and use financial common sense. Retiring does not have to be an impossible dream. Retirement is attainable if you can learn to use financial common sense instead of your emotions. Allowing economic turmoil to paralyze you is purely emotional and will drown you. Job losses, reduced work hours, smaller paychecks are all emotional issues and can be overcome with some good old financial common sense. Start making your financial decisions from a non-emotional view and you will come out ahead almost every time.
Financial Common Sense Workarounds
#1 – Play Catch Up
If you did not invest enough money into your retirement plans during your early working years, it’s okay. It is never too late to catch up. Yes investing early in your career is the best option, but, if you are still working all you have to do is just increase the amount of your retirement plan contributions. Easier said than done? Well it all adds up so do not worry about investing large amounts of money to make it worth while. For example, instead of spending your bonuses or raises use that money to increase your contributions. And if your employer matches your contributions, amen, you are getting free money (up to your plans limits). The more money you contribute, the larger the bundle of money your employer will be handing you (again, up to your plans limits). How can you beat free money? Who can resist free money?
Employer contribution matching works like this. Let’s use the common practice of an employer matching 50% of your contribution up to 3% of your salary as an example. If your employer follows that practice then when you contribute 6% of your salary to your company retirement plan your employer adds another 3%. Therefore you will actually be investing 9% of your salary into your retirement plan. If you do not contribute at least enough to receive the employer match you are leaving lots of money on the table. And leaving free money on the table is a big financial no-no.
#2 – Did The Recession Get You, It’s O.K
If the recession has shrunk the value of your retirement investments, it’s okay. Investment account values go up and down all the time, so it’s not the end of the world if your account value has dropped a bit. Besides unless you are selling immediately after a market drop and before a rebound, you are only realizing a “paper loss”. One way to combat market gyrations is to buy more. When the market goes into a downward spin most of the stocks and mutual funds have a low market value, so in other words they are on sale. Well when is the best time to buy anything? When it’s on sale.
Another good way to offset the severity of your account value fluctuations it to be sure to diversity your investments. The way to do that is to have some money spread around in mutual funds, stocks, bonds and cash. And then diversify even more by spreading the money within the mutual funds and stocks amongst large cap, mid cap, small cap, balanced and international. Now if the market does not rebound by the time you are ready to retire, you may just have to delay your retirement date or retire on a lower budget.
#3 – It’s All About You, And Only You
Hold yourself accountable. If you want to achieve your retirement goals, you are the best person to use for building up a retirement account. Forget about social security, it is a weak source of retirement income. And even if social security does pay out, it will not be enough to fund your dream retirement. Besides do you really want to put your financial future in the hands of the government? Probably not. And forget about a company pension plan, they are not a reliable source of future income. Few employers are offering pensions anymore. But employers are offering 401k and 403b plans because they cost the company less to administer. Just remember, the only money that will be there once you retire is the money you sent ahead. In other words, the only reliable retirement income you will have is the money you personally invest and manage.
#4 – Have No Fear
A common fear nowadays is the fear of outliving your money once you are retired. If you have that worry, there is a financially sound solution used by individuals every day, buy an annuity. Annuities help to ease financial worries by overcoming the fear of running out of money. Annuities are great for retirement because they offer a lifetime guaranteed stream of income. Now there are different types of annuities so before you buy one, do your homework to make sure you are buying one that satisfies your personal financial need.
If you are retiring tomorrow and need an immediate stream of income, you would want an immediate annuity. With this type of annuity you make a lump sum payment and the stream of income starts paying out right away. The opposite of an immediate annuity is a deferred annuity. With this type of annuity you invest into it over time and receive the payout at a later day. Both the immediate and deferred satisfy the fear of outliving your income, the money is just distributed in a different way.
The types of investments held within the annuity can vary also. Your investment money within the annuity can go into fixed or variable investments. A fixed investment pays a guaranteed fixed interest rate. A variable annuity invests in the stock market so the returns will vary depending upon the market performance. Both types of annuities serve different types of investors. Neither one is good or bad. The type you chose to purchase will depend on your comfortable level, financial goals and time horizon.
Stretch To Reach Your Retirement Goals
No one cares about your retirement as much as you do. No one will help you reach your retirement except for you. Only you will enjoy the dream retirement you have planned. You can achieve any goal you set for yourself if you hold yourself accountable and work at it little by little. You have a vision, make it happen.