Planning for retirement can never come too early. Young people across the United States haven’t begun to set aside money for retirement purposes, thinking it is simply too soon to start worrying about something that will take place 30 or even 40 years from now. Unfortunately, there are many Americans who have put off retirement planning for far too long, and are now approaching retirement age with little or no finances set aside. Your own parents may not be adequately prepared for their retirement.
Now that Father’s Day has past, we’ve prepared a simple guide to help your father prepare for retirement. Think of it as a Father’s Day gift that keeps giving, helping to support your loved one and to give him a stable financial outlook well into the future. Let’s get started.
The Cold Facts about Retirement Planning
The Indexed Annuity Leadership Council conducted a survey to determine the status of retirement planning in the United States. The statistics collected in the survey were staggering. Of the findings, several important statistics stand out. These include:
- Almost 90% of survey respondents lack confidence in their retirement savings and financial futures.
- More than 40% of respondents report that they are worried about their retirement years, particularly not having enough money set aside to live comfortably.
- One in four baby boomers (people born between the mid-1940s and 1964) have less than $5000 in retirement savings.
The last number is especially concerning, as financial experts and retirement planners alike agree that savings should be based on one’s salary; ideally, one should have at minimum 10 times their final working salary set aside for retirement purposes. There’s even a timeline available to help track retirement savings:
- By age 30, an individual should have the equivalent of his or her salary set aside in retirement accounts.
- By age 40, three times the salary should be set aside.
- By age 50, six times the salary should be set aside.
- By age 60, one should have eight times their salary in retirement accounts.
- By age 67 (average retirement age in the U.S.), one should have saved 10 times their salary.
The sad fact is that too little is being set aside for use during the retirement years. Without adequate retirement savings, people are working longer, skimping on critical healthcare and medications, living well below their accustomed comfort level, and potentially winding up in serious, detrimental financial situations.
Three Ways to Help Your Father Plan for His Retirement
Now that we have a clear picture of the dire need for retirement savings, many people wonder what they can do to help their parents as they approach retirement age. There are many potential options, but we’ve highlighted three time-honored methods to help ease the process.
- Take charge of your father’s retirement planning – many employers offer sponsored retirement plans and pensions. Employer-sponsored retirement programs like 401(k) plans can create a positive savings situation, but employees must enroll in these programs to take advantage of them. Encourage your father to explore these employer options if they are available; if they ARE available, get him to enroll as soon as possible. 401(k) plans typically offer matching funds – in other words, for every dollar an employee contributes to the plan, the employer will add a matching amount, sometimes even dollar-for-dollar. This can set aside a significant amount in a relatively short time period.
If employer-sponsored plans are not available or not offered by a given employer, there are still other retirement savings options. Some of the most popular options are Individual Retirement Accounts, or IRAs. In these plans, there are specific tax advantages, helping to preserve the value of the savings in the accounts well into the future. Even if your father is enrolled in a 401(k) plan, having a diversified retirement portfolio makes smart financial sense. An IRA is one option, as are fixed indexed annuities, investments in real estate, and even stock/bond investments. With a diversified retirement plan, your father can weather the ups and downs of the economy, ensuring a stable source of income long after he retires from his job.
2. Recruit a professional retirement planner – while many people choose to “go it alone” when it comes to retirement planning, the services of a financial professional can be invaluable in creating a safe, stable retirement. Financial professionals — some who specialize in retirement planning options — can provide guidance, identifying future needs and goals and developing a plan to reach those goals. These professional planners can also provide advice and insight into tax implications, alternative savings strategies, and can recommend ways to fill financial gaps. If your father is nearing retirement age and hasn’t set aside enough money to live comfortably, the investment in a financial planner’s specialized services can create a positive situation, paving the way for a stable financial future.
3. Spend more time with your father – this last tip is not specific to retirement planning, but it can lay the groundwork for the future all the same. It has been shown in numerous studies and surveys that those approaching their retirement years struggle to find activities to occupy them after they’ve quit working. Many retirees discover they are aimless – without a sense of purpose — now that the routine of work is no longer part of their daily activity. Retirees want to feel valued and loved, and spending time with them can create connections that last. To help your father feel like a valued member of the family, spend time with him. Introduce him to new activities such as:
- Museum visits
- Book clubs
- Volunteer efforts
- Movie watching
These cost-effective activities can open new doors of opportunity, allowing your father to discover something to contribute to and to keep him occupied when he no longer is working. And, of course, it brings families closer when they can enjoy activities together.
With these tips, it is easier than ever to create a retirement plan that accounts for current and future financial needs and goals. It’s never too early to start planning for retirement, and by the same token, it’s never too late to take charge of your financial future. Help your father overcome his retirement planning deficiencies with these three steps, and you can rest easy knowing that he can retire comfortably when he is ready.