Surveys and studies regularly report how unprepared U.S. adults are for retirement. The statistics are particularly bad (and sad) for baby boomers, with a majority typically admitting that they do not have enough money saved to retire.
One unfortunate consequence of these harsh facts is the sense of hopelessness that sets in. This leads to inaction. Nothing gets done. An unplanned retirement remains unplanned. Here are four ways to overcome inertia and jump start your retirement planning.
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1. Read a book. Many people are afraid of taking action because they don’t know what to do. Retirement savers are also leery of taking advice from people who are trying to sell something. I don’t blame them. The solution is to educate yourself about the basics of retirement planning.
There are a handful of good books written for those who are nervous or reluctant about starting their own retirement planning. Two books that I recommend are Worry-Free Investing: A Safe Approach to Achieving Your Lifetime Financial Goals by Zvi Bodie and Spend 'til the End: the Revolutionary Guide to Raising Your Living Standard (Today and When You Retire) by Scott Burns and Larry Kotlikoff. I appreciate these books because they offer unique, science-based approaches to the financial aspects of retirement investing and planning. They are also easy to read.
2. Eliminate a debt. A retirement plan can be crushed by debts on your personal balance sheet. To jump start your retirement plan, select a specific debt that you most want to pay off before retirement. Then attack that debt for the specific purpose of smoothing your path to retirement.
3. Purchase a secure retirement investment. If you are financially behind in your plan, the time to start catching up is today. I don’t recommend taking much or any risk at this stage. Instead, pick an investment that is guaranteed to get you closer to your retirement goal and keep you there. Two options come to mind. The first is to begin or increase contributions to your 401(k) plan to a level that earns you the maximum available employer match. If you direct these contributions to a stable value fund, you are highly unlikely to lose value. If your employer has 50 percent matching, that's a guaranteed 50 percent return on your investment.
A second option is to purchase an I Savings Bond from the U.S. Treasury. These are secure, tax-deferred, and pay interest for 30 years at a rate that is adjusted for inflation. It’s a perfect investment for starting your plan and building confidence. You can purchase I-Bonds online for as little $50 with no transaction costs.
4. Estimate your retirement income. Estimate the secure income you can expect to receive when you retire. A good place to start is with your annual Social Security statement or the Social Security Administration's retirement estimator. Your first reaction will probably be, “There is no way I can live on that.” Exactly. That knowledge is a powerful stimulus for the rest of your planning.
Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.