At the end of the day...
At the end of the day...
Many Americans who planned to retire within the next five to ten
years are unhappy to find that their long-term savings, their
nest egg, falls short of what is needed to retire when and as
comfortably as planned. They are finding that their nest egg is
not sufficient to secure a steady stream of income during their
retirement years. And women are especially vulnerable.
According to a recent GE Center for Financial Learning, most
respondents underestimated the life expectancy of a 65-year-old
today by five years or more. In fact, only 11% of those surveyed
knew that the average 65-year old today has a life expectancy
over 85 years of age. However, women tend to live longer than
the average.
The Administration on Aging reports that in 2001, women
accounted for nearly 60 percent of the population age 60 and
older, and 70 percent of the population 85 and older. In fact,
because women tend to outlive their husbands, women are less
likely to be able to stay at home and so are twice as likely as
men to end up in a nursing home. Therefore, it is especially
important for women to make up for lost savings time.
Fortunately, it's easier than you might think.
Simply make your retirement your priority. Throughout their
lives, women make sacrifices for their husband, their children,
and their elderly relatives. By making your retirement saving
accounts your priority now, as your planned retirement date
draws near, you can make up for lost time. To start with, if you
do not already have one, establish an IRA. Even if you are a
non-working spouse, you can deposit up to $4,000 (for 2006) a
year into an IRA, plus an additional $1,000 (for 2006) if you
are age 50 or over.
While the tax-deferred compounding of the IRA may have a
powerful impact on the growth rate of your savings, you may need
to increase your savings in other ways also. For example, if you
are still working, you can contribute at least enough to a
401(k) plan, if it is available, to earn the maximum employer
match allowed by the plan. Additionally, many employer
retirement plans allow workers over age 50 to contribute an
extra $5,000 (for 2006) above what younger workers are permitted
to contribute.
Making up for lost time through increased savings can be done.
And, it might be less painful than you would imagine. Consider
Kathy who is fifty years old and plans to retire at 60. Kathy
wants to increase her savings level but knows that her ability
to change her income is limited. On the other hand, her ability
to change her expenses is totally at her discretion. So Kathy
decides to take two simple steps.
First, instead of making her morning coffee at home or buying it
on her way to work, Kathy is saving money by simply waiting
until she arrives at work and drinking coffee provided by her
employer. By doing this Kathy is able to save approximately $7 a
week and she contributes that savings to her IRA. Over the next
ten years, Kathy can painlessly save a total of $3,640 which,
assuming it grows at an average of 5.5% a year, would grow to
$4,860 by the time Kathy is ready to retire.
Kathy has also decided that instead of eating in restaurants as
often, she will eat one less dinner out each week. Assuming she
would have spent an average of $20 for each of those restaurant
meals, Kathy is able to save an additional $10,400 before she
reaches age 60, her planned retirement age. Again assuming an
average growth rate of 5.5% a year, these savings will have
grown to $13,888. By doing these two simple things, Kathy will
have painlessly increased her retirement nest egg by $18,748 and
will retire more comfortably, more happily.
At the end of the day, as Aristotle said, our "happiness depends
on ourselves." There is still time to increase your retirement
nest egg to an amount that will be sufficient for you to retire
when and as you originally planned. By doing just one or two
simple things, you can significantly increase your savings, too.
Your financial advisor can show you how painless it can be to
make your retirement dreams happier.