It’s no secret that we have a crisis in the U.S. regarding retirement. The crisis is that so few older people have the funds to retire. A new study finds that this results from a basic lack of understanding (ie, a low “Retirement IQ”).
Data from the Annuity Leadership Council shows that many baby boomers aren’t financially prepared for retirement:
- 60 percent of baby boomers think they need less than $1 million in retirement, when in reality at least a quarter of a million will be needed for health care costs alone.
- 1 in 4 baby boomers have less than $5,000 saved for retirement.
- 2 out of 5 baby boomers think they will get more money from Social Security than the average monthly payment.
- 40 percent of baby boomers prioritize lifestyle purchases over retirement savings
- 52 percent of baby boomers have debt to pay down before saving for retirement
These are dangerous misconceptions and practices – the kind that lead to people having to work well past retirement age.
The truth is, people need to start saving for retirement in their 20s, and to keep saving throughout their working lives. Experts say we should save at least 5% of our incomes.
Sure, it would be nice to win the lottery, or to have no money-sucking emergencies in our lives. It would be nice to be so successful that we wind up rich enough not to care.
However, for most of us it will be our savings habits of a lifetime that determine how well we live in our retirement years.
Developing those savings habits is a key component of becoming an adult, really. And like most of life’s passages into adulthood, it’s good to have a partner and mentor in our corner at the start.
Raise Your Retirement IQ; Visit Your Credit Union
Think of your credit union as your partner in saving. Your CU will help you to put together a savings plan that you can stick with through thick and thin. This is the basis of retirement preparation.
Once you have the saving habits you need, you can evaluate the various investment options available. You’ll be amazed at how your money can grow and, more importantly, you’ll be ready to retire when the time comes.