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The Downsides of Not Planning for Retirement

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Retirement security continues to be a pressing concern for Americans. But many people aren’t taking steps to prepare themselves. In late May 2015, The “Report on the Economic Well-Being of U.S. Households in 2014,” published by the Federal Reserve’s Board of Governors, offered many concerning insights into this landscape. 

In the study, 31% had no retirement savings or defined-benefit pension. It was reported 39% of those surveyed have “given little or no thought to financial planning for retirement.” Moreover, these trends were somewhat reflected in people’s expectations for the future. The study showed 26% said their retirement plan consisted of working as long as possible. Likewise, 12% said they never planned to retire, and 45% reported they would work somewhat to keep money coming in.

This data also shows in other surveys. According to the Boston College Center for Retirement Research, many Americans have inadequate retirement savings. Data from the BCCRR's National Retirement Risk Index indicates that as of 2013, over 50 percent of American households don’t hold sufficient retirement funds to maintain their standard of living. The trend would likely still persist even if these individuals worked past the “traditional” retirement age of 65.

What are the Effects?

Here are just a few consequences to keep in mind:

Greater uncertainty in the future – When someone doesn’t take efforts to secure their future, life in retirement becomes more unclear. During those years, more effort will be put into ensuring financial resources stay adequate. It may come in the form of prolonged employment, financial reliance on others, or reduced standard of living.

Reduced standard of living – If a worker or couple starts preparing for retirement in their 50s, it’s evident their financial resources likely will be lesser than someone who started earlier. There are other factors which can influence your post-retirement lifestyle, as well. Longer life expectancies mean there’s more time to account for. Other expenses such as long-term care and healthcare costs have an impact, too. Given all of these variables, if someone doesn’t prepare for retire early, it will be impactful on lifestyle standards. They may even have a lower standard of living than what they enjoyed in their earlier years.

Less independence – Say you don’t engage in financial planning for retirement now. When one reaches retirement age later, they can become dependent on others for security. Children, loved ones, or friends could step in to help shoulder these needs, which in turn lessens one’s own financial independence. Some retirees may even perceive this as imposing an undue burden on their family and friends. It shows how retirement income planning has an impact not only on retirees’ own future, but also that of their loved ones and friends as well.

Continuing anxiety – We covered above how many people plan to keep working in retirement. But the reality is some people won’t be able to for as long as they’d like. Health problems may affect work abilities. In turn, that can impact performance or even a retired worker’s ability to continue being employed. The point is there are many dimensions to post-retirement living which are uncertain. You can’t predict everything. As a result, retirement planning means more than just ensuring financial security. It’s also a solution for long-term peace of mind.

Want to Prepare for the Future?

In short, the earlier you start preparing financially, the greater the chances of retirement peace of mind. You don’t have to put it off now. The first step is financial education. We invite you to use all of the articles here on SafeMoney.com for edification. And should you be ready for personal guidance, SafeMoney.com can assist you.

Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

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