My father, a mapmaker for the U.S. Army, had modest means but a keen interest in saving and investing. As a child of the Depression, he would have appreciated National Save for Retirement Week, which runs this week and offers everyone the opportunity to build a better financial future.
As a nation and as individuals we have a lot of work to do.
The worst economic crisis in 70 years showed us that market gains alone don't create financial security. Median houses prices have dropped 20 percent since 2005. At the current rate, the U.S. would need nine more years to capture jobs lost during the recession. The average 401(k) balance is between $60,000 and $70,000 -- nowhere near enough to support 20 to 30 years of retirement.
Job losses and economic insecurity make it tough to think about saving for the future. Compounding the problem is that too often we're on our own when it comes to funding our financial futures.
And the consequences of not saving are profound. Nearly half of Americans say they will have to pare down their goals because they failed to save enough, according to a new TIAA-CREF survey. Moreover, almost two-thirds acknowledge they're not saving enough for the future.
More than 80 percent of Americans want to save more, but are not very well informed or only somewhat informed about what it takes to accomplish that goal.
With that in mind, I encourage people to use the following roadmap as a starting point.
First, explore your options. Does your employer offer a retirement plan or, even better, offer to match the money you put in? Sign up for the plan, and save enough to be eligible for any matching contributions. If you employer doesn't offer a retirement plan, consider an Individual Retirement Plan or Roth IRA to take advantage of tax breaks given to savings.
Next, seek objective advice tailored to your specific needs. While more than three-quarters of Americans rely on themselves to make household financial decisions, more than half of us admit we don't know much about finance. Find an advisor who can help. Also take advantage of financial education opportunities at your job or a local community college. Make sure to ask your advisor about low-fee investments so that your money is going toward your retirement, not your broker's.
Third, spread your money among different types of investments, like stocks, bonds, real estate, and money market accounts. Different types of investments tend to rise and fall at different times. So if one area loses value, your entire portfolio won't suffer.
Fourth, aim to replace the income you earned when you were working so that you'll always have enough money to cover basic needs. The average monthly Social Security payment for retired workers is about $1,600, while average monthly spending for individuals over age 65 exceeds $3,000.
Finally, don't worry if you can't act on all these strategies right now. The most important thing is to start saving. The earlier you begin the more your money can work for you. A 30-year-old saving approximately $250 a month can build a $350,000 nest egg by age 65. A 50-year-old would have to save about $1200 a month to achieve the same goal.
In my family, we were fortunate. While my father had modest means, his attention to saving and investing enabled our family to have a middle-class life.
It's time to get serious about saving, which is essential for realizing our futures. Years from now, let's look back on National Save for Retirement Week as the time when we got started.
Roger W. Ferguson, Jr., a former Vice Chairman of the Federal Reserve, is CEO of TIAA-CREF and a member of the President's Economic Recovery Advisory Board.
Mr. Roger Ferguson’s Reframing Retirement article mentioned that “The federal government should analyze whether the nearly $170 billion in tax subsidies for 401(k), IRA and other retirement accounts are as effective as they could be in promoting savings, particularly for people with low and moderate incomes.
According to the Tax Policy Center, about 84 percent of the tax expenditure for retirement savings incentives accrues to taxpayers earning more than $100,000.” The U.S. savings rate actually turned negative subsequent to the enactment of The Bush tax cuts. The aforementioned evidences the ineffectiveness of the reduced dividend/capital gain rates and the increased annual maximum contribution limits in raising the U.S. savings rate. It begs the question of whether the reduced dividend/capital gain rates and the increased annual maximum contribution limits of the Bush Tax Cuts should expire and be replaced with an incentive direct toward the seventy-seven percent mentioned in the “TIAA-CREF Saving in America” survey who aspire to save more for retirement next year. One such incentive would be for retirement savings by those, below the Social Security tax limit, be refunding their 6.2% Social Security Tax. The saving from the discontinuation of the Bush Tax Cut to the wealthiest top 2% would more than cover the cost of making saving for retirement free of Social Security tax.
they were only worried about having something bigger and better then the neighbor
Fund managers have PROVEN to be working against the interest of the majority of their investors.
They have worked hard at pushing executives of companies to make profits in a way that pushes jobs overseas. Fund managers have proven that they will not exercise their power with corporate executives to make jobs for Americans in America.
Putting your money into something run by a fund manager is working to cut the middle-class apart.
Invest in things American for America.
Fund managers - TIAA-CREF, will simply give the money to the very same executives that have put so many people out of work. You will simply be giving your money to the very people who created all these problems.
Oh wait that guy would have big gains now
This wisdom of saving is obvious, but enacting political and economic policies that reverse the current trends in America is what must happen, and not in incremental moves.
To begin with, so many people are struggling just to get buy. You have to have discretionary income to choose to save it. Real dollar value has fallen dramatically in the last 20 years. Savers are taxed on their now-miserable dividends, the economy is screaming for consumer spending to help lift the unemployment problem, wages are falling in the jobs that do remain here, price of health insurance is through the roof for people who can still afford it, and this guy is telling us the obvious: you need money put aside for later. Gee, which bills shouldn't I pay to follow this advice?
And, all the while during the 80s, 90s, and 00s, your great corporations were shipping jobs to China and India. The CEO of GE still got a pension and golden parachute.
Ah, this whole thing makes me sick.
Anyone near retirement yet heavily invested in equites in late 2008 was clueless.
As djs111 said
IF you have a job, read this
You can't save if you don't have an income.
Perhaps if the headline read "If you have a job, read this!"
It's JOBS!!! No job - no paycheck. No paycheck - no savings.