Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

10 Steps to Avoid the Retirement Poorhouse


Retirement, the yacht included, will always be a far-off fantasy if you don't plan and save.

Many baby boomers spent too much time listening to rock lyrics that said "live for today and don't worry about tomorrow," which has plunged them into financial trouble and is delaying retirement.

Jane White, a former syndicated financial columnist, wrote America, Welcome to the Poorhouse, which says most of the 3.4 million baby boomers turning 65 in 2010 won't be retiring any time soon and must keep working. A myriad of factors contributed to this delayed retirement including a reduction in pensions and meager saving in their 401K plans.

Here are White's recommendations on how build a nest egg and avoid the retirement poorhouse:

Step 1: Plan ahead to save 10 times your final salary.

If a couple earned $100,000 in their final year of working, they'll need a minimum of $1 million -- 10 times their final salary -- in their portfolio to retire. Yet White cites a Fidelity Investment 2007 report that said the median balance of most workers on the cusp or retirement age (60 to 65) was $43,000, a sum that would last no more than a year or two when coupled with social security.

Step 2: Replace disappearing pensions.

In 1974, 44% of workers were eligible for pensions, but by 2004 that number dwindled to only 17%. To replace a pension, White advises saving the maximum amount that the IRS allows -- $5,000 a year into a traditional Roth IRA -- as a starting point to build up savings.

In Australia, companies in business for more than five years are required to save 9% of an employee's salary, which White would like to see duplicated in the US.

Step 3: The earlier you save the better.

Assuming an employer's contribution of 3% salary a year, people starting at age 25 must save an additional 10% of their salary to build a nest egg to retire. People who wait until they're 35 must stash away 17% of salary, 23% at age 40, and 48% at age 50. Hence, the earlier a person starts building an IRA, the better.

Step 4: Save more and spend less.

One way to increase savings is to bankroll one income of a dual-earning family. But how many families can survive on one salary and save the other? The other alternative is to scrutinize spending and save more. Does the family really need to buy an $800 stroller that in two years may never be used again or the latest $1,200 plasma TV? Those discretionary purchases to keep up with the Smiths cut into long-term savings.
< Previous
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos