8 Reasons Why People Don’t Plan For Retirement
Ashwin Dhanesha , CPA, EA, CFP, PFS, CFA, MBA |
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For most people, the amount of income they need in the first year of their retirement is between 70% and 90% of their living wage in the last year of their working life. Furthermore, most retirees need 60% to 90% of their total retirement income to be generated by the nest egg they have saved for retirement. While most people understand the need for a retirement nest egg, many people don’t plan for their retirement for the following reasons:
They lack the basic understanding of retirement planning – Here are two articles that will help you gain the basic knowledge about retirement planning: the article Retirement Planning 101 will help you understand the what and how of retirement planning, and the article 5 Reasons for Retirement Planning will explain some of the reasons why you should plan for your retirement.
They don’t know where to begin – It all begins by calling a financial advisor. Your financial advisor will help you crystallize your retirement goals, and prepare your personalized retirement plan with a roadmap showing how best to achieve your retirement goals.
They believe it’s too early – Money needs time to grow. The sooner you start saving for retirement, the lesser the amount you will need to save every month, and the more the time your money will have to grow. In short, the sooner you start, the better the chances you will achieve your retirement goals.
They believe it’s too late – It’s better late than never when it comes to retirement planning. Just because you are of a certain age, or have a specific financial profile, doesn’t necessarily mean it’s too late for you to start planning for your retirement. Work with a financial advisor to learn about various options and alternatives feasible for your situation.
They put it off – The longer you wait to start planning for your retirement, the more the amount you will need to save every month, and the lesser the time your money will have to grow. In short, the later you start, the fewer the options and financial strategies that may be available for pursuing your retirement goals.
They think they are too busy to plan – Where there is a will, there is a way. Planning for a financially secure retirement is just as, or even more, important than any other personal or professional matters, that you may be busy with. Your financial advisor should create your personalized retirement plan with the least amount of work for you.
They believe they don’t make enough money to save for retirement –You would be surprised to know how big of an impact small adjustments in your financial habits and priorities can make on your overall financial success. Depending on your age, risk tolerance, and other circ*mstances, you may be able to meet your retirement goals by saving only 1% to 2% of your income every year.
They believe contributing to 401(K) and IRA alone constitutes retirement planning – Retirement planning is not just about accumulating a retirement nest egg in the most efficient manner possible, but also about how best to expend it during your retirement years so that it lasts your lifetime. Remember, 401(K) and IRA are just two of the many available retirement saving vehicles that may be suitable for your situation. There are many other savings, investment, tax and other financial strategies, which may need to be employed to successfully achieve your retirement goals.
Retirement is not a matter of if, but a matter of when. Planning for this inevitable life event is not only a smart financial move, but also a responsible thing to do. No matter your reasons, planning for a financially secure retirement is too important to ignore or even delay.
