The Arizona Republic
Jul. 26, 2004
The stock market goes up and then back down. Do you invest? Do you make your own financial decisions, or do you have some kind of financial adviser? Do you have a retirement plan and retirement investments?
There are numerous studies on the savings plans of Americans, and they come to very similar conclusions. We are not prepared financially for retirement.
In a study by the National Retirement Planning Coalition, more than 40 percent of households have saved almost nothing for retirement. Two-fifths of households have less than $50,000 invested in retirement accounts. One in 10 people do not know how much they have in their retirement accounts. Only one in three households have set aside more than $100,000 for retirement. Not a pretty picture if one is planning to retire soon.
Is it ever too late? I asked Tyler Brilinski, a Scottsdale financial adviser, that question.
"For those in their 50s, the task of accumulating significant assets can be especially difficult," Brilinski said. "However, as the saying goes, better late than never. At this point, self-discipline becomes a critical part of the planning process."
Those with little savings by their mid-50s often display habits that have become detrimental to long-term financial success, Brilinski said.
"I'd estimate that well over half of the retirees that rely on Social Security as their main source of income haven't had bad luck, illness or some other life event that is responsible for their poor financial condition," he said. "Rather, they have procrastinated, overspent and never made savings a priority until it's possibly too late."
Dentist's offices, Brilinski said, are full of patients who are in pain and need help today because they ignored preventive maintenance over the years. No pain, no problem.
So if it is not too late, what do you do? There are some simple steps you should follow. First, create a plan either through your own self-study or with a financial planner.
What funds do you need for retirement?
Do you need 70, 80, 90, or 100 percent of your pre-retirement income to live in retirement?
What is your family history concerning longevity and health? People are living many years in retirement. Will you have enough funds to cover 20 or 30 years?
Second, assess your current retirement sources. What can you expect from Social Security? Do you have a pension plan at work?
Does your company have a tax-sheltered retirement plan? Do you contribute?
Do you have an individual retirement account? If these are available, you should begin immediately putting money away. The sooner the better.
Third, assess funds you need to maintain your current living expenses. You may want to restrict eating out and avoiding expensive travel now in order to live well in retirement.
Finally, make a plan and stick to it. Know what your investments are and what they are costing you. One study reported that 70 percent of all households with employer-sponsored retirement accounts (401(k) /403b /457 plans) mistakenly believe that they pay no fees for the management of these accounts. Every retirement account, including both Roth and traditional IRAs, requires some level of expense for asset management and administrative costs. You should also know that taking funds out before retirement could result in taxes and penalties.
Should you have a financial adviser? That is your choice. Most Americans spend little time studying their accounts. One study suggested that one in four retirees spent no time on their accounts. About one-third spent one to three hours per year.
If you don't have the time or want to take the time, maybe an advisr is for you. Be sure that you determine what products, if any, the adviser is offering. Does the adviser offer all products or only those she or he carries? Remember, most advisers have their preferred product. You might want to find one who advises but who doesn't handle products.
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