I recently talked to a good friend who was starting his first “real” job. He told me about the orientation he sat through and the retirement options he was given. As you might imagine the main option was a 401(k) plan, others included a 457 plan and an IRA. I asked him a simple question: which option did they say was the safest, most predictable retirement option? Silence…..
He was expected to make a decision right then about how he was going to save for his retirement, how he was going to allocate his contributions and pick between 50+ mutual fund portfolios. In my opinion that’s a pretty big decision and should be given a little more than 5 minutes worth of thought. Unfortunately, most simply follow the financial crowd and hope for the best.
Here is something I can’t understand: the average person will spend more time clipping coupons to save money on toothpaste and toilet paper than they will understanding exactly what’s happening in their retirement account(s). We have been brainwashed into thinking that all we have to do is set it and forget it and when it’s time to retire we’ll be sitting pretty (based on past market performance, of course).
Now don’t get me wrong here, I’m not saying that you should run like crazy from the options mentioned above. The point I’m getting at is that there has to be some thought put into a decision this big. There are thousands of different allocation and diversification options inside government sponsored retirement plans, some of which are much safer than others. The problem is most people don’t take the time to understand exactly where their money is invested. Aside from that, most don’t take the time to educate themselves on any alternatives that are available. Maybe access to your money along the way in important to you so a 401k or IRA might not be a good option. You need to ask the hard questions to those managing your money and if they can’t answer them, find someone who can.
Why a safe retirement investment is so vital
All you have to do is listen to the stories of those who planned on retiring in late 2007 and 2008 and the importance of safety will slap you across the face. Some lost over half their savings and are now having to live on less or in most cases work far past the point they wanted to. The most important time in life to have money to live on is when you are not working to make it, so why would you risk not having enough and putting a damper on your golden years?
There has to be a change. On top of America’s incredibly poor savings rate, we are risking money we will need to rely on the most. Safe retirement investments are out there, maybe you know of one. Share your experience with your retirement accounts, lets hear about the good, the bad and even the ugly.