America has always invented its own status symbols. A lifetime ago, status was being a two- car family, or having air conditioning. A decade ago it was huge houses with three-car garages. There was a time only the rich went on cruises, a status symbol whose cachet is long gone. Just like designer clothes and handbags, the aspirational aspects of American life have long been available to the masses.
But there's one luxury that only a few are still able to afford. And unlike fake designer purses, this luxury cannot be made in China and distributed to a vast group of demanding consumers.
That luxury is Retirement.
And only a select few will be able to enjoy the reality of a life-ending decade or two, spent relaxing and pursuing hobbies. Retirement is truly the last exclusive luxury, increasingly available to only a limited group of people - a true status symbol.
The Impact of Demographics
It's partly because of demographics. The huge baby boom generation is the first modern cohort to retire without pensions. The conversion from defined benefit plans to 40l(k) plans started in earnest in the early 1980s. Those retiring today have spent the past 30 years working and investing for their own retirement -- if they understood the importance of setting the money aside, and if they had the skills to make smart investment decisions.
Even worse, the approaching generation of retirees is being hardest hit by the current economic slowdown. Many who had counted on using "extra" income for retirement savings, after paying off the mortgage and sending kids to college, are now finding themselves out of a job.
Just ask a few people who say they are "retired" and most will tell you it wasn't by choice. Their jobs left them before they were ready. And many are "consulting" or working part-time in an effort to stretch the money they did save in an effort to make it last for their later years.
The optics aren't good for the next generation, either. Only knowledge workers with higher education stand a chance at the jobs of the future. But to gain that knowledge, they are burdened with student loans, carrying interest rates far above what the government pays to borrow.
Federal student loans are not a gift, but a $1.8 trillion dollar burden that makes it impossible for even those who have a job to build a future and save for retirement.
As we live longer , retirement becomes more expensive and elusive - two characteristics of a true luxury.
The Sad Facts
Social Security benefits represent more than 90 percent of total income for 34.2 percent of Americans over age 65. And for about 64 percent of those over age 65, that monthly Social Security check -- roughly $2200 after deductions for Medicare -- represents at least 50 percent of their income.
You can understand the angst of today's senior population over the fact that the Fed is holding down interest rates to less than 1 percent. Even for those who saved a little, there is no chance for today's retirees to live on income from investments. They must dig into their savings to make ends meet.
And that does not make for a happy retirement, wondering whether your money will run out before you do!
An Easy Peek Into the Future
Are you on track to have a real retirement? It is human nature to bury your head and close your eyes because the idea of planning for retirement seems insurmountable. The entire financial services industry is running ads and commercials offering to help you through this process. But beyond the fear of the unknown, there also runs a nagging worry that the industry is basically out to help itself by selling products to you. Wall Street has earned a great measure of distrust.
You owe it to yourself to take an independent look at where you are heading. This coming week is America Saves Week, so this is a perfect time to start. The place to start is a website created by the non-profit Employee Benefit Research Institute: www.ChoosetoSave.org. Once there, click on the green box for the "Ballpark Estimate" tool. (There is now an app that you can download to your iPad or smartphone.)
This is a simple interactive worksheet that is completely anonymous. You can fill in your age, income, amount of current savings, and other important information as well as your desired retirement age and percent of current income. The calculator integrates expected Social Security benefits and pensions earned.
Then with a click of your mouse, you can see whether you're on track to meet those goals. Or, given your current rate of savings, how far your standard of living will likely fall in retirement! And it will show you how much more you should save to reach your goals.
The Savage Truth is that you may never reach that status symbol of the future - a perfectly relaxing retirement that maintains your standard of living without anxiety. But it's also true that even a semi-retirement is better than none at all. Retirement is certainly a "status symbol" work working toward.
Forgetting To Establish A Credit History
A <a href="http://brown.edu/Administration/OISSS/general_info/newcomers/establishing_credit.pdf" target="_blank">good credit history is essential </a>to a successful financial future. Landlords, lenders, insurers and even employers use it as a way to judge you.
Taking Out Way Too Many Credit Cards
Yes, you want to make sure that you establish a credit history, but that does not mean taking out every credit card imaginable. Taking our <a href="http://www.thedailymuse.com/money/top-4-financial-mistakes-to-avoid-in-your-20s/" target="_blank">high-interest cards with large balances</a> can lower your credit score and lead to overspending.
Paying Bills Late
If you want to increase your credibility in the eyes of lenders,<a href="http://www.bbb.org/us/article/good-credit-score-tip-make-more-than-the-minimum-payment-29606" target="_blank"> paying bills on time is essential.</a> Also, it is a good way to avoid unnecessary late fees!
Rushing To Get Your Graduate Degree
A graduate degree is not only a financial investment, but a time investment. Before embarking on a post-graduate degree, it is important to do a <a href="http://20somethingfinance.com/the-5-worst-twenty-something-personal-finance-blunders/" target="_blank">cost-benefit analysis </a>to ensure the diploma you are seeking is right for you.
Building Way Too Much Debt Early On
Going after a degree at a time when you have to take out enormous student loans just to graduate puts you at a <a href="http://20somethingfinance.com/the-5-worst-twenty-something-personal-finance-blunders/" target="_blank">significant financial disadvantage</a> once you finish school.
Using Emergency Funds For Non-Emergencies
It is called<a href="http://www.financial-planning.com/gallery/fp/five-financial-planning-retirement-tips-for-twenty-somethings-advisors-2678502-1.html" target="_blank"> your emergency stash for a reason</a>! And no, a flash sale at Nordstrom Rack is not an emergency.
Eating Out Too Much
Be honest, when was the last time you actually had a full fridge? Despite what you keep telling yourself about how <a href="http://www.thesimpledollar.com/2012/07/07/dont-eat-out-as-often-188365/" target="_blank">expensive groceries are getting</a>, the bottom line is that eating at home saves money, <a href="http://www.thesimpledollar.com/2012/07/07/dont-eat-out-as-often-188365/" target="_blank">especially if you are single</a>.
Not Saving For Retirement
We understand that retirement could not feel further way when you are in your 20s. But it is never too early to start saving. Need an incentive? When you are young, you have the advantage of <a href="http://www.bankrate.com/finance/financial-literacy/retirement-planning-for-20-somethings-1.aspx" target="_blank">giving your investments much more time to accrue interest and grow</a>.
Paying Too Much In Taxes
As much fun as it is to get a tax return at the end of the year from the IRS, you only get a big refund when<a href="http://www.bankrate.com/finance/financial-literacy/retirement-planning-for-20-somethings-1.aspx" target="_blank"> your employer is withholding too much money from your paycheck during the year</a>. If that's the case for you, adjusting your withholdings may be a good idea.
Buying A Round Of Drinks At The Bar
You know you can't afford it. You might as well be burning your money.
Paying Too Much In Rent
Most budget gurus suggest that your rent should be<a href="http://budgeting.thenest.com/im-paying-much-rent-20911.html" target="_blank"> no more than 30 percent of your monthly income</a>. If you are anything like us, you are paying much more than that.
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