Paycheck Chronicles

Are You Doing Retirement Savings Right?


This morning, I was listening to NPR and a story came on about income inequality in retirement.  It was an interesting story, though I think that a lot of the statistics were presented poorly.  On the surface, it is about how this current generation of retirees has a lot of women living with low incomes.  It’s a story that we’ve all heard many times.  It’s interesting, but it’s not particularly useful.  These women can’t go back in time to change how they prepared for retirement, and current workers are facing a very different landscape.

I think it is more important to look at the bigger picture:  everyone needs to be thinking about, and saving for, retirement.  Gone are the days where you could work for the same company for 40 years and retire with a pension, plus Social Security benefits, and live well through retirement.

The good news is that I think everyone who is currently of working age understands this new reality.  I’m not sure when the shift in thinking occurred, but I’m not that young and I’ve always known that retirement savings was important, and I couldn’t count on Social Security.  My kids, who are teens, absolutely get that they need to be responsible for creating their own retirement income.

The bad news is that while most workers understand that they need to save for retirement, many of them don’t have any idea what that actually looks like: how much they need to save, and the best ways to save.  Heck, some days I’m not sure that I am doing it right.

As a society, we’ve done a great job of shifting our thinking about who is responsible for retirement savings (the individual vs. the companies or the government), now we need to make the next big jump to understanding how we need to save for retirement.

I can’t write a post with step-by-step directions, because there is no single right answer.  Everyone has a unique situation, and so their best possible retirement savings plan will be different from their friend or their neighbor.  At the bare minimum, you should be contributing to the Thrift Savings Plan (TSP) if you are eliglble, and to an Individual Retiement Arrangement (IRA).  Don’t forget the non-working spouse!  With their relativelyhigh contribution limits, many workers will find that they don’t need anything else.  Once you’ve maxed out those two options, you need to meet with an unbiased, non-commissioned financial advisor who can help you build a plan that works for you and your family’s needs.

I’m mightly thankful that there are opportunities to save, especially tax-advantaged opportunities, and that people seem to have gotten the message that they need to save for themselves.  Now, let’s put that knowledge into action!

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