Retirement planning is kind of like working out, something we know we should do but too often put off or ignore. Compare annuities, 401k plans, Social Security payouts, and IRAs to plan for your retirement before you find yourself in a bind. Most Americans are concerned about short and mid-term spending and place long-term savings concerns far away, according to “A Crash Course in Basic Retirement Planning” by Jim Blankenship of The Street. Two-thirds of people recently surveyed who had to retire earlier than planned for one reason or another were not financially prepared. Those surveyed who were still working said that they were behind on their retirement savings more than half of the time. Almost three-quarters of people said that they will have to work part-time for at least the first ten years of retirement to supplement their income. And sadly, more than half of those surveyed said they didn’t really understand the financial tools they would use for retirement.
The article recommends saving first in your 401k plan as much as your employer matches, then putting money into a Roth IRA. After that, it suggests maxing out the remaining value you can contribute to your 401k, using taxable savings, and purchasing annuities. An indexed annuity is a newly popular investment vehicle, but there are also fixed and variable annuities to look into for investing. Those people worried about how they will find the money to save can use an interesting approach called Parkinson’s Law. The Third Principle of Parkinson’s Law basically says that the more money you have, the more you spend. “Expenses always rise to meet available income.” By using the reverse of this law, if you put money away into your savings, your expenses will go down to meet the remaining amount you have available. It will probably be challenging at first, but you will find a comfortable way to live within those means and save for your retirement.
