The Elephant in the Room

Timothy Brown |

elephant-in-the-roomNot enough people are saving for retirement.  With the poor outlook of Social Security, people need to be saving more of their incomes for their later years. According to the Employee Benefit Research Group, 44% of Americans are not savings enough to meet their basic needs in retirement.   Another study indicated that 70% of Americans believed their standard of living will go up in retirement.    Unfortunately, this is highly unlikely.  Without significant effort years in advance, the likelihood of a great retirement is a pipe dream. The older you are the harder it gets, but you must start where you are.  Don’t wait.

What are the steps one needs to take today to achieve their financial independence in the future? Do the following and you will be on your way.

  • Spend less than you make – This has been said a thousand times, and it is as true today as it was 1000 years ago.  While many people follow a budget, they are still living beyond their means.  To make this happen, you need to look at all your spending and identify all areas that could be reduced.  Consider using online tools, such as, or a pad and paper.
  • Pay off all your debt – If the music stops (i.e. you lose your job), you don’t want to be hocked up to your eyeballs. You need to eliminate your debt.  We often find that the amount of debt people are carrying prevents them from saving for retirement or much of anything else.  Steps need to be taken. If your car (boat, cabin, RV, etc..) loan payment is too big, sell the car (boat, cabin, RV, etc..)  If you are carrying a large credit card balance, stop using them and pay cash. We recommend paying off all non-mortgage debt as soon as possible.
  • Build your emergency fund – holding 3 to 6 months of expenses in cash/cash alternatives is imperative. Without cash reserves, people are often forced to use debt or dip into retirement savings (usually with penalties!) to cover expenses whenever something unexpected happens.
  • Invest for retirement – Now that you are spending less than you make, you have paid off your loans, and have a nice emergency fund, start investing 15% of your gross income into your Roth IRA, your 401k, or another retirement account.  We recommend 15% of your gross income initially, however, depending on where you are in terms of the appropriate retirement nest egg, it could be more (rarely less).

While these are just a few of the steps we recommend to our clients, these will get you going in the right direction. They are not easy steps by any means. However, they are critical to your retirement success.