Do You Want To Retire Someday?

05/11/2010 – Despite Odd Requests, the Client Is Always Right

04/26/2010 – Is Palliative Surgery Ethical?

04/12/2010 – Reflections of a Modern Dinosaur

Today, I would like to take a step away from medicine and surgery and focus on a topic that affects many veterinary professionals, whatever their positions.

I recently read, yet again, some somber statistics about the financial health of Americans.

• 43 percent of Americans have less than $10,000 in retirement savings, excluding pension and housing equity..
• 27 percent of Americans have less than $1,000 in retirement savings..
• 54 percent have not planned at all for retirement.
• Few employees participate, or participate much, in employer-sponsored retirement plans. Some don’t contribute enough to get the “match,” which is basically free money offered by their generous employer..
• In 2007, the Congressional Research Service published a report about 401(k) plans.  It states that “If the median retirement account balance of $100,000 among households headed by persons 55 to 64 years old in 2007 were converted to an annuity, it would provide a monthly income of $700 per month to (someone) retiring at age 65 in 2009.”

That’s $8,400 annually. Ouch!

Meanwhile, without going into a political debate, I think it is fair to say that Social Security is in the red, so who knows if we will get anything in return for the money taken out of our paychecks.

So how are you doing, dear reader, with respect to retirement?

Let’s do some basic math, even though that was never my forte. You may have heard that you should save at least 10 percent of your gross income. Think about it: If you work for 40 years and save 10 percent of what you make, all things being equal (with a savings rate and an inflation rate of 0 percent, just for argument’s sake), then you would save 4 years worth of income.

How many years do you think you could survive during retirement, with 4 years worth of income?

Whenever I am bold enough to approach the subjects of retirement, saving and investing with colleagues and technicians, I hear all kinds of excuses:

• “First, I need to repay my school loans”
• “I need to focus on my wedding right now”
• “I just sent my son to private school”
• “I live paycheck to paycheck”
• “We just bought a house”
• “I just totaled my car”
• And my favorite: “Yeah, I was thinking of starting something next year”

The list goes on. Basically, what people tell me is that they can’t afford to save for retirement.  My point is, you can’t afford not to save for retirement.

I suspect that an important reason for people’s procrastination is that most have no clue what to do. Most don’t know the difference between saving and investing, or investing and speculating. Most don’t know the definition of inflation, a stock, a bond, a mutual fund.

So it seems that the two main obstacles to saving for retirement are:

  1. A lack of willingness (or to be perfectly fair, a sad lack of ability for those who truly live paycheck to paycheck).
  2. A lack of reliable information to know how to take the first step.

What are you going to do about it?

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