Many people don’t save for retirement when they are young because they feel they are too young to invest for a goal that is 40 years down the road.
- At age 40, they may be ready to invest, but have children who are in college and have tuition bills to pay.
- At age 50, they still have other things to spend their money on.
- When they finally begin saving at age 60, it is too late. There simply isn’t enough time left to build up a sufficient retirement account by age 65. As a result, they often decide to keep right on working well into their 70’s.
When people rely on Social Security for their retirement income they discover that it will replace just 40% of their last income. For someone retiring today at age 65, the maximum monthly benefit is $1,961. A big help to be sure, and an important component of a plan for retirement security, but many people want and need to maximize other sources of income to maintain their pre-retirement standard of living.
People who do start contributing to a Self-Directed Retirement Account, like a 401(k) or 403(b), seldom set aside enough to adequately provide enough income. The result of that under funding is they often look for higher returns regardless of the higher level of risk those higher returns may require.
The worse part of this problem is the blissful ignorance of what level of money is required, at what rate of return, assuming how much risk, to achieve what level of financial security at what age.