The Herald Bulletin

October 4, 2013

'Big Joe' Clark: You're probably planning wrong for retirement


— Too many people think retirement planning is simple.

They think you just throw some money into a savings account, with little regard for the account’s tax status, and put little thought into the investments, since the market always goes up. They assume if they save “x” amount of dollars today, they should be fine 10 or 30 years down the road.

Studies have shown that many Americans “plan” this way. An article in the New York Times by Teresa Ghilarducci, a professor of economics at the New School for Social Research, pointed out that “75 percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.”

How could this be?

They must have been saving a portion of their paychecks each year and trying to put in at least something into a 401(k) or IRA most years, right?

What went wrong?

Many critical retirement planning factors are never even addressed by many financial advisers, much less Americans in general.

It’s naive to assume that if you do some simple math on the back of an envelope to come up with the final account size necessary to survive in retirement in, say, 30 years, you’ve done your job and can cross “retirement planning” off your to-do list.

To make that kind of calculation you’ll need a crystal ball that can tell you what inflation (or deflation) will be each year leading up to and during retirement. The crystal ball will also need to be political savvy, since it will need to inform you of future tax bracket and retirement account changes.

There’s a reason that, according to Ghilarducci, 49 percent of middle class workers will be living on a food budget of a paltry $5 a day during retirement. What makes this statistic unfortunate is the reality that it can be prevented.

Retirement planning is a process that must be reviewed during the journey to retirement. Simply hitting a single roadblock like a health issue, needing to support an adult son or daughter temporarily, or having to delay retirement all can have impact.

There are very few reasons why anyone should not be prepared for retirement. Don’t let poor planning or even worse, lack of planning, destroy your retirement dreams.

Joseph “Big Joe” Clark, whose column is published Saturdays, is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or 640-1524.