Financial Strategy #1: Planning for Retirement

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Financial Strategy #1: Planning for Retirement

The book Your Stronger Financial Future: The Eight Essential Strategies for Making Profitable Investments lists eight misconceptions, truths, and strategies to help readers deal with a variety of major financial issues. I'll be highlighting these in several posts and giving you my thoughts on them.

Today we'll look at strategy #1 which deals with planning for retirement. The book says the following on this subject:

The misconception: You're already prepared to retire.
The truth: Recent trends make it much more difficult to retire.
The strategy: Overcome the misconceptions and chart your course.

I have to agree with the misconception here. Many people think that they have Social Security and that's all they will need to retire. These people are sorely mistaken (and by a long-shot.) If you are counting on Social Security as your sole source of retirement income, you are NOT prepared to retire (and you won't be until you change a few things.) I'd go so far as to say if you count on Social Security for a large portion of your retirement income, you're probably not prepared to retire.

Unfortunately, it's not easy to save enough for retirement, as they point out in the "truth" statement. They note that Social Security will likely be decreasing benefits, traditional pensions have gone away, 401ks are not working as planned, and a whole host of other issues that point to the fact that it's tough to retire. I have to agree here as well.

Their strategy is listed in six steps as follows:

1. Develop an overall financial plan.
2. Identify the inflation-adjusted amount of money you will need at retirement.
3. Retain a licensed financial professional.
4. Develop a personal emergency fund.
5. Instead of accruing debt, store up savings.
6. Consider annuities to overcome longer life expectancy.

I'm not so sure about steps #3 and #6. #3 could be something like "learn about personal finances so you can manage your own money," though you'd then probably want to make this step #1. And #6 is "ok" as long as the emphasis is on the word "consider." It's fine to consider all your options IMO, but I can't tell if this is what they truly mean or if they are endorsing annuities for everyone.

What's your take? Did they get it right or is something off/missing?

Posted on September 24, 2011 at 06:08 AM in Retirement 2011+ | Permalink

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