Paycheck Chronicles

Does Retirement Have You Spooked?

Halloween pumpkin

With Halloween at hand, let’s take a moment to unveil some scary retirement stats. My hope? That you’ll be spooked into making positive money moves before your future sneaks up on you.

The scary truth: By the end of June 2018, only 13.5% of eligible servicemen and women had opted in to the new Blended Retirement System, reported the Military Times.

If you’re spooked: You have until the end of 2018 to decide whether to opt in. My view has always been that the decision is less about number crunching and more about how you envision your career: If you plan on — and believe it’s likely to happen — serving at least 20 years, sticking with the legacy system probably makes sense. However, my guess is that a pretty big chunk of the 1.4 million who haven’t opted in probably won’t go the distance and might be better served in BRS. The same article reported that 1 in 10 who opted in were not putting money in the Thrift Savings Plan, thus giving up “free money” in the form of matching contributions.

The scary truth: Each year for the last couple of decades, the Employee Benefit Research Institute has conducted what they call a Retirement Confidence survey. In 2018, only 17% of respondents were “very confident” that they would have enough money to “live comfortably throughout their retirement years.”

If you’re spooked: Start saving for retirement today. It doesn’t take a lot to get the ball rolling. At USAA, you can start investing with as little as a $50/month automatic investment. With the TSP, you can contribute one percent by signing up at myPay.

The scary truth: At this time last year, tongue-in-cheek, I applauded the “skyrocketing” 5% savings rate tracked by the Bureau of Economic Analysis. It’s gotten worse, with the most recent numbers tracking at 3.5%. Retirement is just one savings goal, but there are probably a lot of others, and 3.5% is not likely to get the job done.

If you’re spooked: Yes, start saving today.

The scary truth: According to the Boston College Center for Retirement Research’s January 2018 National Retirement Risk Index, 50% of working households are at risk of a reduction of lifestyle when they retire. (Of course, there are a lot of assumptions and projections utilized to come to this number.)

If you’re spooked: Map out your own retirement plan. What will it take to live the life you want to lead and do what you want to do? There are plenty of online tools and calculators like the ones at usaa.com/goals to help you out. Start planning today.  

The scary truth: Speaking of maintaining your lifestyle in retirement, how far would $1,409 take you? That’s the average Social Security retirement benefit in 2018. You’ll probably need a lot more.

If you’re spooked: Don’t rely on Social Security alone to fund your retirement. Be sure your plan includes multiple sources of income. Pensions, employer retirement plans, IRAs, annuities, real estate and non-retirement stocks, bonds, mutual funds and exchange traded funds are all options to build on and not rely upon Social Security.

The scary truth: Employer retirement plans like the 401(k), or the military’s Thrift Savings Plan, are a mainstay for retirement saving. A recent report* pegged the average account balance of participants at $103,866.

If you’re spooked: That could be a pretty impressive number if you’re 28, not so much if you’re 58. Find out where you stand today.  If you’re just starting out, focus on good retirement savings habits, if you’re further down the road, it’s time to identify your savings goal…my guess is it’s substantially more than $100K.

Spooked into action? I hope so!

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