"The vast majority of Americans are not adequately planning for retirement, which could create a financial time bomb for their family that eventually places a significant financial burden on their children," said Mark Brown, managing partner at Brown & Tedstrom. "One of the first steps in mapping out a plan is to develop a checklist to identify your strengths and address any gaps you might have to help ensure a successful retirement."
The good news, said Brown, is that the majority (71 percent) of non- retired adults age 45 and older are saving some percentage of their current income for retirement. But how much should people be saving?
According to Brown & Tedstrom a 30-year-old making $100K a year and investing 10 percent of his/her income with an 8 percent return will have $2 million at age 65. That person would be able to live on $100,000 annually for the rest of his/her life, which is approximately 5 percent of his/her retirement savings. However, for every 8 years after age 30 that a person waits to start saving, the amount he/she needs to save doubles.
The survey found that traditional retirement beliefs and expectations are changing. Over half (54 percent) of all respondents expect to continue working past retirement, yet only 13 percent are concerned about it, indicating that the retirement landscape has shifted -- people now want to continue contributing to society well past age 65. Additionally, despite current estimates that $41 trillion will trade hands by the year 2052, intergenerational wealth transfer doesn't appear to be part of financial planning -- only 22 percent of 45-64-year-olds expect to receive retirement income from an inheritance. And as company and government pensions become less certain, only 43 percent of those surveyed said they expect to receive retirement income from those sources.
"Notions that people once considered mainstays of their financial plan, such as inheritance, pensions, social security and retiring at 65 are no longer expected, much less guaranteed," said Peter Tedstrom, a partner at Brown & Tedstrom. "These survey findings shed great insight into people's concerns and illustrate the importance of building a diversified financial plan."
To this end, Brown & Tedstrom outlines the top five retirement landmines people should avoid, and provides the top five tips for successful retirement.
Top Five Retirement Land Mines:
- Don't expose more than 10 percent of 401K investments on company stock.
- Diversify your investments; make sure your risk is appropriate for your retirement horizon.
- What if you get sick? Plan for the unexpected and build shock absorbers into your plan.
- Don't fall for low rate adjustable mortgages that sound good now but put you in a deep hole later.
- Resist market timing and impulsive short-term decisions.
Brown & Tedstrom Top Five Tips for Successful Retirement:
- Create a retirement checklist: The Brown & Tedstrom Retirement Scorecard helps clients determine how much they need to save for retirement.While everyone's income level differs, the formula factors cash flow needed at retirement by looking at current cash flow,investment capital, years to retirement, return on investment assumptions and future cash flow projections.
- Develop a retirement shock absorber: Everyone wants a smooth ride in retirement, but recent historical events have taught us that anything can happen at any moment. That's why building retirement shock absorbers into your investment portfolio can cushion the bumps enough to get you to your destination comfortably.
- Talk to your family: Start talking to your children when they are in their 20s or 30s. Even if the topic is sensitive, the consequences of avoiding it could have a serious impact on your children and grandchildren.
- Plan for a long life: Diversify investments,avoid depleting assets,continually educate yourself, and work with a Certified Financial Planner(TM)Practitioner to make sure you don't outlive your financial plan.
- Don't forget about long-term care: Most people don't realize how expensive long-term care can be. Work with a Certified Financial Planner(TM)Practitioner or insurance professional and look into long-term care insurance to make sure you won't have to move back in with the kids if you outlive your retirement.
