Increase Your Financial Intelligence for Retirement
Let’s face this fact having enough money to retire comfortably now is much harder to gain than how it was 50 years ago. A survey by the Transamerica Center for Retirement Studies found that nearly 80 percent of workers believe they will have a harder time achieving financial security in retirement than their parents’ generation.
In fact, a GOBankingRates survey found that Americans’ biggest financial fear is never being able to retire. There are actually several reasons why person are now having difficulties building that nest egg for retirement vs. 50 years ago.
According to the Centers for Disease Control and Prevention, a resident of the United States can expect to live to about 78 years old [source: CDC]. Many financial advisors recommend budgeting to spend at least 70 to 80 percent of your annual pre-retirement income to keep your standard of living. If you live off of $60,000 a year while you’re working, that means you’ll need between $42,000 and $48,000 a year during retirement. So, if you live until age 78, you’ll need to have assets valued between $1.18 million and $1.34 million.
Let’s take a look at a few reasons it’s getting harder to save for retirement and what can be done to retire comfortably:
With inflation increasing year after year, the power of your retirement money is also decreasing simultaneously in power. According to the Consumer Price Indices (CPI) from the U.S Bureau of Labor Statistics as of 2016 you need $200,000 to purchase what $130,746.19 could purchase in 1996. As the years pass by the value of the dollar with decrease and inflation will increase.
Having a Hard Time Saving
With 401ks now more common and require workers to contribute for their own money to save for retirement. Workers are finding it hard to set aside money in savings because of stagnating wages and rising living costs so it leads them to not make the necessary preparation for retirement. Opening a retirement savings account such as an IRA can be confusing and for those who do find the process complicated they typically do nothing, so they wont have an account to save in.
Many do not understand the difference between saving and investing. Saving is putting aside money on a regular bases usually in a bank account which does not yield good returns.
Investing is the way that you will begin to really grow your money and begin to build wealth and retire comfortably. If you keep your savings in a savings account, the amount of interest you will earn will be very small. However, if you invest in mutual funds, stocks etc., your interest rate will be much higher.
Mutual Funds are a great way to start investing. You should have your money invested in more than one mutual fund. You don’t need to have 10 different mutual funds, but three or four is a good start. If you feel confident with investing in individual stocks, be sure that you spread your investments over a wide variety of companies and business types. A good place to start investing in individual stocks is Robinhood.
Healthcare Cost is Increasing
Health care is a big hindrance in retiring comfortable. Many Americans are dependent on healthcare coverage from their employer but healthcare benefits provided by employers aren’t as prevalent now as 50 years ago. So retirees must cover more health costs on their own.
For example, the average amount a 65-year-old couple who retired in 2016 would need to cover medical expenses in retirement was $260,000, according to Fidelity Investments. But a couple retiring in 2017 would need an average of $275,000, an increase of $15,000 over just one year.
Paying Off Debt
There are plenty of reasons Americans are deeper in debt now than 50 years ago. For one thing, access to easy credit “is much more prevalent than it was 50 years ago. According to the latest figures from the Federal Reserve, Americans now have more than $1 trillion in revolving credit — primarily credit card debt — compared with $1.3 billion in January 1968.
For those with debt, it can be hard to find room in the budget to save. But the cycle of inadequate savings and debt is compounded when people raid what money they do have in their retirement accounts to pay for debt.
How to Prepare for Retirement
Focus on paying off what you owe as quickly as possible so you don’t carry debt into retirement. To avoid racking up more debt — which will make it harder to save for retirement . Get in the habit of only spending as needed.
Take advantage of Employer Retirement Services
Many employers now offer free financial education and retirement planning information through their workplace retirement plans. But only a few takes advantage of this. Taking advantage of this service will better prepare you for retirement.
Invest as Much as you Can
As mentioned earlier Saving will not be enough for retirement. Investing into options such as Mutual Funds and ETF’s. will better prepare you. You may also consider investing into other things such as Stocks and Real Estate.
Increase Your Earning Potential
By acquiring high level income skills you will increase your earning potential in addition to that also increasing your sources of income will increase your earning potential. The income from these skills and sources of income should go directly into your investments for retirement.
Here is a list of a few high income skills that your may consider:
- High Ticket Sales Closer
- Website Developer
- Software Programmer
Here is a list of a few ways you can generate passive income:
- Invest in dividend paying stocks
- Create a Blog
- Create an online course
- Produce an Audiobook
- Real Estate Rental Income
- Create a smart phone app
Financial Literacy is not taught in schools, the Rich Dad, Poor Dad by Robert Kiyosaki breaks down the barriers between the literacy taught in schools and the financial literacy needed to survive in the real world.