The Employee Benefit Research Institute says that 43 percent of today's workers have less than $10,000 in savings. The AARP recently reported that 20 percent are delaying retirement because of the recession. Then there is a growing number of people forced into early retirement because of layoffs, family pressures and illness. There's a huge financial squeeze out there, and far too many are forced to take Social Security early, tap into their 401(k) plans and deplete their savings.
Now is the time for people in their 20s, 30s and 40s to take heed and make plans.
The days of quitting your job at 65, then using your pension and Social Security to fund travel and golf are pretty much over. Boomers are being affected now, but all this has huge implications for younger workers. The answers aren't easy. No one is sure how long younger employees will have to work before they can receive Social Security benefits. Predictions vary as to what will happen to Medicare. Pensions aren't always assured, and how much your 401(k) plan will be worth depends on market conditions and how it is invested.
So what to do? You may be better off taking financial advice from your grandparents than from your parents. Older folks grew up during the very difficult days of the Great Depression and WWII yet, as a group, they are more financially secure today. Here are some tips they used and some newer options Generations X and Y can use to control their own financial destiny:
Pay yourself first. Take a portion of each paycheck and put it in savings.
Invest the maximum allowable in your 401(k) plan or its equivalent. These plans are portable; you can take them with you from job to job.
Open a Roth IRA account. This tool allows you to control how your money is invested and is tax deferred.
Find a qualified investment adviser you trust and can communicate with. He or she should be willing to help you even if you only have a small amount to invest. Your adviser should help diversify all your investments and give you a balance between growth stocks in quality companies and mutual funds.
Monitor all your investments on a regular basis. This recession is one example of how the economy can shift in an instant. What might have been a good investment yesterday might not be the best choice today.
Keep a checking account for monthly bill paying.
Have a savings account for emergencies. This might be an interest bearing money market account or a CD that can be liquefied without penalty if you need it.
Defer purchases until you can either pay for them at once or until you are sure you can make the payments no matter what happens to your income stream.
Rent until you can afford to own.
Buy only as much property as you can afford taking into account all the added expenses including closing costs, real estate fees, taxes, monthly mortgage payment, insurance, furnishings, etc. Most of the recent housing crisis was caused by people buying much more house than they could afford.
Buy quality. This goes for your car, your clothes, your electronics, your furniture or your jewelry — anything you pay for. Quality products endure. They last longer, cost less when depreciated over time and are easier to maintain.
Marie Stempinski is the founder and owner of Strategic Communication in St. Petersburg. She specializes in public relations, marketing, business trends consulting and employee motivation. She can be reached at firstname.lastname@example.org