Throughout your working years, you put in long, hard hours at the office, at the plant - wherever your career path has taken you - with one thought in mind.....retire at age 65 and live nicely for the rest of your days. Maybe a little condo in the Keys...sipping margarita's poolside...cabana boy bringing towels - oh wait, that's my retirement dream! Hey, who doesn't have a retirement dream or two. But, what if someone were to tell you that most US employees will not be able to afford to retire by the age of 65? Talk about bursting the retirement bubble! POP!
A six month study conducted in 2010 reviewed approximately 10,000 retirement accounts from employees of 110 US public and private companies. The 401k is the primary retirement tool for most employees, so how do the contributions we make today affect our retirement tomorrow?
Well....to put it bluntly, we need to contribute more. Easier said than done, I know I know. Hey, I am an offender when it comes to this. Most employees were under contributing to begin with before being hit with the recession. So now what?
81% of employees 18 or older will not be able to afford to retire by 65. Encourage all employees to contribute to the 401k plan your company may have. Lesson learned, it's never too late to start a retirement fund, and since it's an automatic deduction, its not even missed from the paycheck. Educate employees on the plans your company offers. Most Gen Y employees see the here and now. Help them visualize the benefit of contributing to a retirement plan, and the future down the road.
Older employees in their 60's will need to work to 75 in order to live the retirement life they are expecting for themselves, at their current level of contribution. And for those who have under contributed? Start to pony up the dough. Employees older than 55 will need to contribute about 45% of pay if they plan on retiring at 65. Employees 45-55 will need about 19% of pay to retire at 65.
It's not so much the funds you choose, as it is the contribution you make. Employees who contribute the greatest percentage of income have the best opportunity for retirement by 65. That's not to say you just put your money into any old fund. Do the homework to see what best suits your investment style. Afterall, you are investing in your future. Even increasing a contribution from 2% to 4% of total income will take years off the age of retirement.
The message is clear and I know what I have to do. Do you?