There are Problems ahead for those without a Retirement Fund

Everyone faces financial challenges throughout their lives. Those going to college begin fairly early because in most cases that involves taking out a student loan which will need to be paid back when they start out on their careers. Their prospects should be fairly good if they graduate successfully because statistics show they have a better chance of a highly paid job than non-graduates. Whether they handle their finances well is another matter. Those that don’t in general may find that in their later years life is not as comfortable as they would want.

70% Of Final Salary

There are competing demands for your money; you will want a good retirement fund but there is always the temptation for short term gratification; a new car, big house, latest smart phone and exotic holidays. These trappings of apparent success often take priority over taking action to secure a happy life in later years. It is a worrying trend because the Social Security System is unlikely to ever be more than a support in those years. Estimates suggest that you will need to have as much as 70% of your final salary as income once you retire and the monthly pay checks stop.

A recent Wells Fargo survey finds that people over the age of 60 only have an average fund of $60,000, and a significant number have nothing at all according to Bankrate last summer. Realistically many cannot afford to retire but may have no choice. Social Security falls far short of what anyone will need. The average benefit check is just $1,335 at a time when there is the likelihood of older people facing more health issues alone. Those that have struggled and used their credit cards to subsidize their lifestyles are in even greater danger.

The options vary with age. Those who graduate, get a good job and start making retirement provisions in their 20s should have few problems. Those in middle age and older that are in the position outlined above with insufficient savings must act immediately. That includes plans to downsize at the same time as getting rid of expensive debt, typically that on credit cards where balances incur a high rate of interest.

Downsizing and Its Impact

Downsizing is likely to make a significant difference to your life. If you own a large family home you are unlikely to need so much room in later years with the children gone. There is often a chance to cash in and put some dollars sameday into your bank by moving to somewhere smaller. Perhaps if you are a couple with two cars you will able to make do with one?

Take Loans and Reduce Burden

It is dangerous to be carrying expensive debt. It makes sense to take out a personal loan to pay off such debts because the rate of interest will be lower, even if you have a poor credit score. You can budget far more comfortably if you have a single monthly payment over an identifiable time rather than varying amounts payable on existing card balances.

Even if you have cleared such debts prior to retirement you will still face a challenge. Perhaps you can get a part-time job but you surely don’t want to work too many hours and for too many years after reaching the official retirement age? You may be able to work online of course which allows you to have flexible hours in most cases. Whatever choice you make you will need extra income.

People are living longer, often more than 20 years after retiring. That is a long time for those who have not saved towards those years when the pay check is no longer an option. It makes you wonder why many seem to be ignoring this potential problem. It appears that the phrase ‘live for today and tomorrow will look after itself’ is the principle by which many are living. Few it seems are asking themselves about ‘tomorrow’ and there will be consequences. If they do nothing else they should live within their means and pay off high interest rate debt so they are debt free on retirement. How they will live from then will depend on Social Security and perhaps a part-time job. It doesn’t sound much of a reward for a working life!

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