In News & Commentary

Americans Lack Confidence in their Retirement Habits

MGO strives to demystify retirement planning for its clients – our goal is to help individuals build confidence in their investment potential through education and custom counseling. That’s why it can be disheartening to hear that Americans are fearful that their retirement won’t turn out as they hope.

A recent CBS News article highlighted an American cultural phenomenon that has only worsened since the 2008 economic recession – a general fear and unease when it comes to saving for retirement. According to the article, as many as 41 percent of Americans don’t believe they will be financially prepared to retire when they wish to.

To Americans, retirement saving is the 2nd most worrying financial issue, behind only the immediate expenses of bills and day-to-day spending. The article also highlights the common perception that it is extremely difficult to both handle regular expenses and save for retirement simultaneously.

Less than half of Americans believe they will retire at age 65 or younger – a severe drop from 10 years ago. And confidence in the government’s retirement benefits are also low – only 32 percent of Americans believe Social Security will provide their needed benefits at the time they retire.

It’s easy to view this report as dire news. At MGO, however, our decades of experience in retirement planning have taught us that there are no situations which can’t be improved through wise choices and prudent planning. For anyone concerned with saving for their retirement, there are a couple lessons to take away:

Start Now: If you aren’t saving for retirement yet, you should start, and young or old, it’s never too late. What is important is to get some momentum going in your retirement account. Even if you can’t afford much, you can start small and adjust your savings amount at a later date.

Diversify Beyond Homeownership: Many people view homeownership as an investment – to a certain extent, it can be true. But after the recession in 2008, home values dropped significantly. And, there isn’t much evidence that homes increase in value above the rate of inflation, at least not beyond a case by case basis depending on region. Anyone who sells their home will still need a place to live, and those costs can drain any gains from selling the home. Investing in options such as 401(k)s and IRAs is a way to hedge bets against the housing market.

Don’t Borrow from Retirement Accounts: Withdrawing funds from accounts, like IRAs, prior to retirement age, can make one susceptible to additional tax and penalties. Unless it’s a dire emergency, avoid this option at all costs.

Don’t Count on Social Security: As the cited article says, confidence in Social Security is extremely low. So don’t count on it. Take action now to make sure you can rely on yourself, or at least supplement Social Security, and live your retirement years on your own terms.