If you are not debt-free, you are not ready for investing for retirement. You need to follow the steps previously discussed before you can began to invest for retirement. This is step number five of your essential steps.
The previous steps were:
- The Foundation
- Quick Fund
- Payoff your debt
- Fully-funded Emergency Fund
Now, you are on step five – Investing for your retirement. How you retire is entirely up to you. No one cares more about your money than you do. Just as with everything in life, you have retirement choices. You can choose to retire comfortably or you can opt for one of three other choices.
Let’s look at each choice:
Choice 1: The Terrifying Retirement
People who select this choice don’t intend to make this choice. When these people began working and never thought about their future. They always thought they’d get to it later. Well, later comes and find themselves old. It is then that they realize they have nothing saved for retirement and have no options for current or future income.
Choice 2: The Affliction Retirement
This one is so close to the terrifying retirement that you feel terrified when you are in it. The main difference between choice 1 and 2 is that others are willing to support you, most likely your grown children. This puts a tremendous load on a couples who are trying to raise their own children and save for their own retirement. You are dooming them to repeat your retirement mistake.
You have passed on your affliction to them. This can create a bad cycle that is difficult to break. Your children won’t be able to get ahead financially because they’re spending their retirement savings on you instead. When it comes time for them to retire, they will look to their children to care for them, the cycle continues.
You don’t want to feel that because you took care of your children when they were young, they should take care of you when we’re old.
This mindset is horrible. You are assuming that your adult children will be able to support you. What if they unable to care for you? Their financial resources might be limited. Also, you are hurting your grandchildren, not just your adult children. As a grandparent, you don’t want to take anything from your grandchildren. However, when you choose the affliction retirement, this is exactly what you’re doing.
If you have already retired and are relying on your children, see if there is any type of employment you can get. Contribute to the household expenses however you can. Babysit the grandkids, so childcare expenses won’t affect the budget. If you have not retired, then get busy and get saving.
Choice 3: The Common Retirement
Unfortunately, most people fall into this category. They have some retirement savings, but nowhere near enough to live on. Twenty-nine percent of people age 55 or older do not have any retirement savings and their employer do not offer pension plans. Of those have retirement savings, only have a little over $100,000 saved. This is not enough to live on for the long term. When this happens, they’ll have to keep working well past retirement age. Even if they do not want to work, they will have to work.
Those who fall into the common retirement do so for one of two reasons. They either follow or ignore. The followers are prone to go with whatever financial decisions others in their circle are doing. They don’t bother to research or put much thought into their future. If a friend or family member says they have a great investment opportunity, they jump right in. They don’t think about it and often end up with nothing from the so called “sure fire” deal. These people don’t have a budget or a retirement plan. They are in debt. They indulge themselves spending tomorrow’s money on today’s wants. They don’t bother to think about the future. When retirement rolls around, they often have a very small amount saved.
Those who ignore know retirement is coming. They know they should be doing something about. However, they ignore it and think that their poor financial decisions will never catch-up to them. Their poor money management leaves them deep in debt. They stay in debt. There future looks bleak because there’s no financial security for them.
Choice 4: The Best Retirement
You can have the best retirement, by having a plan. You start by investing early, preferably as soon as you get your first job. You stay on a budget. You live below your means. You avoid debt. You avoid the temptation of keeping up with the Joneses. You work hard. You tithe. You keep track of your expenses. You invest in your employer’s 401(K) up to the match. You open a Roth IRA. In the end, you retire with the best retirement.
Proverbs 10:4 Lazy hands make for poverty, but diligent hands bring wealth.
Now, you know the choices available to you. Which one you choose is entirely up to you. It’s never too late to start. You just need to do it. Take control. Remember, Warren Buffet’s best advice on investing, “Never invest in anything you don’t understand.”
After reading this post, you might be saying, “Where’s the meat and potatoes? You haven’t told me in what I should invest. Nor how I should invest.” Don’t worry. I am going to cover investments in a later post. You’ll just need to come back.