Having unrealistic expectations [as to how you will get by in retirement] can lead to all sorts of financial challenges. [Planning for retirement by implementing a savings plan will make it much more enjoyable. Let me explain.]
By Motif Investing
The 4 unrealistic expectations of a secure retirement are as follows:
1) Social Security will take care of us in retirement
The government has openly admitted that Social Security in its present state is underfunded and will only pay out roughly 75% of its commitments if left unchanged…
Depending on the government to fulfill its promises with Social Security is a risky proposition. As a result, it’s important to save and invest as much as possible on your own.
2) Hard work is all it takes to get rich
Unfortunately, hard work is standard amongst people who’ve successfully built a large enough nest egg for retirement. Not only does one have to work hard, one also has to persevere for as long as possible in order to save and invest…
Besides hard work and perseverance, getting rich in America also depends on:
- educational attainment,
- family background,
- and inheritance, according to a new report by researchers William Emmons and Bryan Noeth at the Federal Reserve Bank of St. Louis. There also needs to be:
- a certain amount of risk-taking,
- good timing,
- and luck involved as well…
It’s easy to think we’ll always be able to find a job when we need one simply by using our good looks, charm, and skills. However, what if another financial crisis like 2008-2010 hits and millions of people can’t find work? One’s savings could easily be depleted in such a scenario.
In December 2007, the national unemployment rate was 5.0 percent, and it had been at or below that rate for the previous 30 months. However, at the end of the recession, in June 2009, it had risen to 9.5 percent. In the months following, the unemployment rate peaked at 10.0 percent in October 2009. Before that, the most recent months unemployment was over 10.0 percent were September 1982 through June 1983, during which time the unemployment rate peaked at 10.8 percent.
Thanks to the sharing economy…there might be plenty of small jobs to do but it’s unlikely any of these jobs will be able to replace a regular full-time job wage with benefits. Thus, it’s important to start managing your money early in case another period of high unemployment unexpectedly surfaces. Start saving for retirement as early as possible too and don’t be fooled by retirement myths.
4) A nice inheritance awaits
Baby boomers have saved and invested, helping push the stock markets to record highs. Surely, some of the $30 trillion dollars of wealth accumulated will pass on to the next generation. This may be so, but what if the timing for expecting an inheritance is miscalculated given people are living much longer nowadays? Even worse, what if there is no inheritance to speak of?
It may be more practical to work with the mindset that there is no impending inheritance that you can rely on, rather than the other way around.
RETIREMENT MADE EASIER
The best way to ensure a healthy retirement is to:
- start saving early and
- take responsibility for your financial future.
- Take advantage of pre-tax retirement investment vehicles like the IRA, Roth IRA, and 401k… [and] once you’ve maxed out your pre-tax retirement accounts,
- save additional after-tax money in order to continuously invest for yourself.
Consistent investment contributions, along with the power of compounding interest over time can help can get your portfolio ready for your retirement needs. Let Motif Investing help you get there.[The original article*, written by Motif Investing, has been slightly edited ([ ]) and abridged (…) by the editorial team of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here – register here) to provide a fast and easy read.]
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