You’ve seen the frightening surveys that say Americans are ill prepared for retirement,
but let’s start the year on a more pro-active foot. It’s time to jump-start your savings
plan and to help out; I’m going to break it out by generation.
Millennials (Born 1980-2000): Whenever you ask someone who is already retired, the
best piece of advice for those starting out, the answer is almost unanimous: “Think
about and save for retirement finances as early as possible!” Start by understanding
your cash flow -- track what's coming in and going out -- so you can find the money to fund your various financial priorities.
For many, paying off student loans will be at the top of the list. Your goal is to grab hold
of and accelerate the process as much as possible. But you should also try to squeeze a
tiny bit of money out of your cash flow and direct it towards retirement, especially if you
work for an organization that offers a match. Ideally, you can start by saving about 6
percent of your salary for retirement early in your career. Even if you begin at a lower
level, try to get in the habit of retirement saving and increase the percentage every year
or as your cash flow allows.
Gen X (1965 to 1979): Pity the poor Gen-xers, some of whom have lived through three
huge market meltdowns (1987 stock market, dot-com and housing). Depending on
where you were during each of these crises, you may have been forced to reduce
retirement contributions or in extreme cases, to invade savings and retirement accounts
Understandably, the timing of these events has negatively impacted the Gen-X
generation. That explains a recent report from TD Ameritrade, which found that 43
percent of Gen X said they’re behind in saving for retirement, only 26 percent very
financially secure (vs. 40 percent of Boomers) and 37 percent Gen X would like to fully
retire but say they won’t be able to afford it.
Here are some goals for this is the period of your life. Aim to be consumer and student
debt free; accumulate an emergency reserve fund of 6 to 12 months of living expenses;
and try to increase your retirement savings contribution up to 15 percent. If you are
able to max out your retirement, you can then consider college education funding, but
it's important to focus on yourself first.
Baby Boomers (1946 to 1964): At this age, kids are generally out of house and that
means that people can put most of the financial focus on retirement. Although 10,000
baby boomers retire every day, many spend more time researching and shopping for a
car than planning for this milestone! Without worrying about the kids, this period could
allow you turbo charge your savings to make up for the years when you weren't able to save enough. It's also a time when you shift your mindset from growing your assets to
protecting them and figuring out how to generate the income you need.
Silent/Greatest Generations (1910 to 1945): You’ve done it—you have actually retired!
Even if you have ample savings, it is important not to spend too much money early on in
your retirement years. This is especially true, if you retire when markets are in a
downturn. Considering the increase in average life expectancy, your nest egg has to
generate income for twenty years or longer. It’s also imperative not to blow up your
retirement by assuming too much or too little risk. And of course, after you turn age 70
½, you will need to factor in Required Minimum Distributions.