Retirement – It's Sooner Than You Think (honestly)

Many people hear "retirement" and think— what? 401K? Roth vs. Traditional IRA? Stocks, bonds, mutual funds? Do they?

Or do many people put money away according to the suggested amount and then simply hope that when retirement comes all will work out?

One report I read estimated that 66 million Americans have put away a Whopping $0 towards retirement.

Many people are still thinking there might be a thing called Social Security around when they retire. Social Security: as of 2004, the average annual Social Security retirement benefit is approximately $11,000. That is not a lot to live on folks. Plus, we all hear the news periodically that there might not be any Social Security around when we get older and need it.

And as a further WAKE UP call, I found a calculator which estimated (without Social Security):

• a couple at 40
• bringing in $90k a year (together)
• with very modest investments

would need to save an additional $2,690,000.00 ( yes 2 million +) in order to retire at 65-- OR – plan on working an additional 29 years!!

Now before you get overwhelmed and click over to another article—lets put our heads together and simply cover a few very very basic start up basics.

1) Standard Of Living: You need to know at what standard of living you will want to live during retirement.

2) Basic Living Expenses: You will need to calculate the cost of basic living expenses (at that level) i.e. electric bill now of $200 = what in 2030?

3) Hobbies and Leisure Activities: Know what type of hobbies, and leisure activities you will keep busy with and what their cost might be then.

4) Family Visiting / Travel: Realize that more and more children move away when grown. So while they work out of state—YOU may need to do the traveling to see them. Plan for these costs.

5) Convalescent Care (nursing home costs) provincially run about $100/day median. You will need to multiply that times the same 4% inflation rate. Then multiply that times the number of years before you may need it—to approximate how much you may need to afford for your housing when you need assistance. Truth be known—WE need to plan to handle that cost ourselves, rather than think our children will be able to take on that kind of additional cost.

You will need to total yearly amounts. You will need the approximate yearly cost to live (at your desired level) during regular healthy retirement. And, you will need the total yearly amount of costs to live in assisted or full care living facilities ( for each – you and mate).

Multiply each yearly amount by the number of years you might be living in that circumstance. Example: Retire at 65. Live healthy retirement- 15 years (so 15 x yearly cost of healthy living) . Live assisted – 8 years ( so 8 x yearly cost of living in care).

You now have two totals that when added together equal your estimation of the total dollar amount you will need to draw from in order to live after retiring. NOW you are ready to begin planning your investments in such a way that you can achieve that TOTAL number by the time you retire.

Here are some tools to help you now that you are ready to take that first step:

USA Today retirement cost calculator: http://www.calcbuilder.com/cgi-bin/calcs/RET2.cgi/usatoday

Motley Fool’s retirement area http://www.fool.com/retirement.htm?source=PFinAg

Metlife’s retirement area http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,1674,P1946,00.html

About.com’s HUGE retirement resource area: http://www.retireplan.about.com/

Until next time—all the best,

Kate

A good number of my columns deal with finances and money-related issues. Obviously, these are issues we have to confront everyday. However, I have to try to keep in mind the fact that money has only a limited value in our lives. Many of us, including myself, often lost sight of the fact that money is a means to an end, not an end in itself. It has no intrinsic value. It is only worth the benefit or enjoyment that a person can get from it. If someone is unable to glean any benefit or enjoyment from the things it can buy, then it is worthless to that person. We all know (or at least we should know) that money can't buy happiness, but I'd like to go a few steps further in demonstrating how money lacks intrinsic value.

I have trouble getting excited about my retirement that may or may not occur 25 years from now. A few weeks ago, I received my annual statement from the Social Security Administration, informing me about how much my monthly benefit would be for each of the following scenarios: working until age 62, age 67, age 70, and upon becoming disabled. I wasn't impressed with those figures. Also, so what if I might have hundreds of thousands of dollars in my various retirement savings accounts by then? I'm not impressed with those figures either. In fact, I wouldn't be impressed by any dollar figure. The two main reasons that I can't get excited about retirement only serve to highlight money's lack of intrinsic value.

First, I know that, not even counting inflation, time devalues money for almost every individual. Here's an example of what I mean. At my current age, I can now afford most of the things I wanted at age 20 but could not afford. However, I have not gone out and bought them because now I no longer want them. At age 60, I'll probably be able to afford most of the things I want now but cannot afford. But, when that time comes, will I still want them? I doubt it. I fear that when I finally reach retirement, I'll no longer be interested in spending any money on anything except the basic needs of life like food, clothing, and shelter. While it's important to be able to afford those things in your twilight years (many seniors can't), I can't gleefully anticipate retirement to live a life of mere existence that all the money in the world can't remedy.

In honesty, no amount of money of can sufficiently make up for the damage done, both physically and psychologically, by the aging process. The old saying goes that "youth is wasted on the young." Well, I'm going to add the following corollary: "High incomes and large bank accounts are wasted on the old." It's too bad we can't have our retirement (along with the retirement money) when we are young and can still enjoy it. But such are the consequences of money's lack of intrinsic value.

Second, all the money in the world could not adequately compensate a person for being disabled, sick, or dead. Don't the people who are so excitedly looking forward to retirement realize they could die or lose their health before (or shortly into) their retirement? That has happened to countless numbers of people and continues to do so every day.

Wouldn't it be nice if someone could guarantee you that you would live to be 100 and stay in as good of health as you are in now? Unfortunately, no one will be ever be able to give you that guarantee. Obviously, none of us have even a minute more of life promised to us. However, the longer the time period we plan to hold on to our money, the higher the chance that something will happen to us before it can do us any good.

By the way, money's lack of intrinsic value is the main reason you should never put it ahead of your health. However, there are many people who do exactly that. Some will work themselves to death or ruin their health just to make a few extra dollars. They apparently don't realize that money and possessions become meaningless when and if you lose your health (or your life). I speak from experience on this issue. Nine years ago, I was diagnosed with stage three cancer. I was sure I wasn't going to make it, even after I was told by the doctors that the chemotherapy was destroying the cancer. It's amazing how all of my material possessions that I had thought so much of suddenly became so meaningless to me when I had lost my health and thought I was going to die. True, money can be used to buy the best health care possible. However, even the best health care money can buy can't always restore you to good health or even save your life.

Of course, a lot of people save money over the course of their lives, not to spend it for themselves, but to leave it their children and grandchildren. That's great, although I've always believed that buying large insurance policies is a much more cost effective way for people to enrich their heirs. Regardless of whether you leave your heirs money in the bank, property, possessions, large insurance payouts, or all of the above, whatever they receive will be just as intrinsically challenged as it was for you.

The bottom line is that, while we all must earn as much money as we reasonably can and save responsibly for retirement and other events in our lives, we must also keep it in perspective and keep our priorities straight. Perhaps the use of more of our financial resources to help others who are less fortunate is one way to keep our focus in the right direction. At any rate, we should never overemphasize money's importance or put it above things that actually do have intrinsic value - things like our families, our physical and mental health, and our spiritual well-being.

Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.