HOW SOUND IS YOUR PLAN FOR RETIREMENT by Dianna Tafazoli

The world has changed.   We face more economic challenges today than ever before.  The hardships of the Great Depression, we either read about in textbooks or heard stories from parents and grandparents, but hardly a reality for baby boomers and beyond.

Over the past several years, the reality of our finances and the turbulence of a global economy is a constant conversation at the dinner tables of average American families.  Yet, our responsibility to do what is necessary to face a retirement future with readiness, still remains.  I remember parents saying, “Save for a rainy day.”   The economic uncertainty of our time requires that we save for a tsunami. The cost of maintaining our standard of living is much higher than it was for our parents.

In addition, economic conditions have created differing and varying levels of responsibility for retirees.  Retirement incomes are increasingly being shared to support other family members, including adult children and their families who are either unemployed or under-employed.  Providing support to family members is what we do as Americans until they can get on their feet.  Therefore, because our plates are fuller than ever before in recent times, planning for a long life after retirement must be approached with care and a deliberate commitment to live well below our means.  You cannot live at your means and certainly not above your means, but below your means in order to have a cushion of economic longevity.  Remember the goal is to have your resources outlast you.

It is more important than ever to explore ways to increase your technical knowledge in order to have the wisdom, security and comfort you desire in retirement.

FLEXIBLE PLANS               

In order to make anything work from the simplest to the most complex venture, one must have a plan.  One of the most important components of the plan is flexibility.  Life changes, people change, and as we know, the world and what makes it run – the economics of supply and demand – impacting the way we live also changes.

Getting ready for retirement requires tremendous personal investment, both financially and emotionally.  There is an entire laundry list of things each of us must do to prepare for retirement.  No two lists will look the same.

Obviously, one of the first things we need to do is develop a plan, a sort of action plan for our lives.    Developing an action plan requires no real technical expertise or fancy charts and drawings.  It is your own personal plan whose primary criterion is to develop a plan and stick to it.  No matter how wonderfully constructed your plan is, if you simply toss it aside, it is useless.

Emphasis must be placed on the need to be flexible in your plan, so that if you have to change some things, rearrange some items or redo it altogether, not to worry.  The important thing is not to abandon your plan.  Having a plan is like having a roadmap to your desired destination.   You may discover that you can take a number of alternate routes to your destination, but nonetheless, you have a roadmap that you know most emphatically leads you to where you want to go.

When you are building a PLAN for your retirement future, always remember what FLEXIBLE means.  F – Financial literacy is a must.  You gain that literacy just as you gain any other body of knowledge – read, inquire and ask questions.  L – Liabilities – know what they are and work on eliminating as many of your liabilities as possible before you retire.   E – Earnings – know that your earnings will be lower in retirement than as an active employee, respond accordingly.  X- Xceptions – there are none.  We don’t get to make Xceptions to the importance of having a plan and simply say  ‘I don’t need one”.

Everybody needs a plan in order to successfully get where they need to be.  I – Invest in your future by prioritizing what your goals are and sticking to a plan that will help you reach them.  B – Budget – if you have shied away from living on a budget in the past, as you move into retirement, living on a budget is your best bet to making sure your resources outlast you.   If you very temporarily step-off the train, you must immediately make plans to get back on board, it is your future.  L – Lower – E- Expenses.  Lower your expense by taking advantage of services offered to seniors – eating out, travel, hotel accommodations, and grocery shopping discount-days for seniors, senior home repair programs, and homestead exemption programs for seniors.

FLEXIBLE might only look like an 8 letter word, but it packs a whole lot of punch for getting ready to retire well.

SAVE-SAVE-SAVE                                                                                         

Remember your laundry list of things to do and expand it to include the all important aspect of SAVING.  We learned from our parents as children to save in the event of the unexpected happening.  There is no avoiding the unexpected as living, breathing human beings – things happen.  No matter how well we plan, how careful we are – things happens.

As such when things do happen and most certainly most things that happen require financial resources to move towards a solution or remedy.  We are not saying that money is the great equalizer or problem solver; we are simply saying that in most cases having some extra money might help to make the rough spots smoother.

When we speak about saving, the very notion seems to conjure up something big.  Therefore, if we cannot save a lot many of us end up not saving at all.  If you look at any financial picture – any amount of money outweighs ZERO.  Each individual’s retirement goals and savings capacity will be starkly different.  However, our collective goal as Americans is to retire well with financial security and comfort.  After working for a greater part of our adult lives, every American’s aspiration might be to have a plan that will allow them to live on their own agenda.

Americans have long moved away from the passbook savings accounts of our parents and grandparents.  However, the need to save has not lost its importance.  Today, we must be more aware of the financial markets, savings and investments and participate more passionately in building and securing our own retirement future.  Saving has to become contagious to us whether a little, a lot or somewhere in between.  It is imperative that we become more financially literate and apply the economic principles of supply and demand in our everyday lives.

Most of us rely on savings through employer-sponsored plans such as some version of the 401K plan,  the Thrift Savings Plan (TSP) for the Federal workforce. Although, new employees to the federal service are automatically enrolled in TSP, they may opt out since it is a voluntary program.  However, not participating in the TSP at some level would not be one of the best choices to make.  Fully maximizing your participation in the TSP on the other hand might just be one of the wisest choices you will ever make to enhance your resources in retirement.

The TSP has a diversity of funds, including its safe Government Securities Fund (known as the G fund).  The principal amount of your investment is always safe, guaranteed by the Government.  The average American’s income is derived from three sources in retirement – employer pension, savings and investments.  Federal employees, unlike many Americans, have the luxury of all three – a life time annuity from their federal retirement plan (CSRS/FERS), savings and investment via the Thrift Savings Plan.

In order for your plan to work towards building a safe and secure retirement future with the luxury to retire well, SAVINGS must be at the forefront of your plan.

Dianna Tafazoli

P. S.   Always Remember to Share What You Know