Sushi Money

When is the last time you’ve had a retirement health check-up?  There’s a lot of information out there to help answer questions we have about saving and investing for retirement (or during retirement).  But if you’re like most people, some of that information is pretty confusing.  Have you considered meeting with a professional to look at where things stand?  Research data shows that more Americans are doing something to prepare for retirement than ever before, which is very good news.   But at the same time, we’re also very concerned about our future retirement.

Concerned about the troubled economy, rising health care costs and falling home values, Americans’ confidence in being able to afford a comfortable retirement fell at a record rate over the past year, sinking to its lowest level since 2001.

”This year’s results show a very dramatic reduction in the public’s confidence about having a comfortable retirement,” said Dallas Salisbury, president of the nonpartisan Employee Benefit Research Institute, which has conducted a comprehensive Retirement Confidence Survey with the research firm Mathew Greenwald and Associates for 18 years.

“In an encouraging sign, this year’s survey found that 47 percent of workers say they or their spouses have tried to calculate how much money they will need for a comfortable retirement. That figure is up considerably from the low point of 29 percent 1996 and slightly higher than 43 percent in 2007.”

“As before, the 2008 survey found that doing a retirement savings calculation - even if it’s just a rough estimate - is particularly effective at changing behavior: 44 percent of those who calculated a savings goal changed their retirement planning, and of those, 59 percent started saving or investing more.”

“Still, savings levels are modest. Almost half (49 percent) of all workers report savings and investments of less than $50,000, and 22 percent have no savings at all, the survey found.”

So we know it’s important to keep saving and investing, and putting money away for retirement.  In fact, that’s the single biggest thing we can do to improve our retirement situation- save more money on a regular basis.

One way to do that is to open your own retirement fund.  More people are doing so than ever before,  and The New York Times takes a closer look at this too in A Stalwart of Retirement Planning: The I.R.A.

So if you’ve already got a retirement plan in place, is it something you can fall back on (i.e. borrow money from) before retirement?  Yes, that’s possible.  But it’s a risky move to borrow from your retirement plan whether that’s an IRA or your 401(k).

In my view that’s the last place you ever consider borrowing money from, and if you don’t have to, then simply don’t do it because many people never pay it back:

“Nearly one-third of adults who have prematurely withdrawn funds from their retirement products said they cannot pay them back, and 45% said they either cannot pay back the funds or have not begun to do so, according to a recent Wall Street Journal Online/Harris Interactive Personal Finance.”

“Even among the highest income earners surveyed—making more than $75,000—more than one-quarter of respondents said they cannot pay back their premature withdrawals.”

“Those ages 45 to 54 are less likely to be able to pay back their premature withdrawals, and those ages 18 to 34 were more likely to be currently making payments.”

Retirement planning is about a lot of things, but most importantly it’s about having enough money to fund our needs when we are older. Sometimes those needs change- especially when our family situation changes. Keeping the retirement money straight can sometimes be a challenge, but it’s important to consider how marriage, divorce, death or job changes impact your retirement plan.

And with new laws, new financial products and a lot of people looking ahead at retirement, it’s no wonder that more of us turn to a financial professional for help.

“Over the last few decades, much of the responsibility - and risk - of on-the-job retirement investing has shifted to employees. Fewer workers have traditional defined benefit pensions. And while many employees still have defined contribution plans, such as matching 401(k) plans, they handle their own saving and investment decisions.”

“Here’s the problem: For most of us, do-it-yourself planning leads to needless mistakes and financial loss. That’s because most of us aren’t investment professionals, and we need expert help to reach our goals. This becomes painfully obvious in a rocky economy and stock market, like the one we’re experiencing now.”

“And there’s one other painful truth: Most people just don’t want to be bothered. Only 19 percent of 401(k) plan participants make a trade of any kind in their accounts in a given year, according to research from employee benefits consulting firm Hewitt Associates. That suggests more than 80 percent of us just aren’t paying attention.”

I’m certainly not about frequent trading inside a 401(k) plan per se, but the point is valid in that many people are not even thinking about the choices they have in their retirement plans, or making new choices when life situations change. 

Some of the choices in 401(k) plans are limited, and some plans have too many choices to understand easily.  But some plans do offer a more flexible target retirement option that rebalances automatically based on age.  Do you know what your options are within your 401(k) plan?  Do you know how your retirement funds are allocated?  If you’ve been at your employer for 15 years, is it time to rebalance the investments within your 401(k)? 

So by not paying attention, the article indicates that we might need to make some active choices over the years for how our money is managed within the 401(k) plan.  Can you do that yourself?  Sure, it’s possible.  But if you are counting on that 401(k) plan to be your primary income or supplement during retirement, then maybe it’s worth it to consult with a professional.  A good financial planner or investment professional can help simplify the process and validate the best choices out of the options available.  When it comes to our retirement, that’s a pretty good idea.  After all, most of us get an annual check-up with a doctor.  Why should our financial health be any different?

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