Investing for the golden years

by Gwen Allen
No matter what your plan, or lack thereof, one thing is for certain—saving for retirement is a major concern for most people. No longer shrouded in the protection of employer pension plans, more and more individuals are wondering how to save for retirement.
Accredited Asset Management Specialist (AAMS) Brian Michel of Edward Jones said people face a much different circumstances today than they did 20 years ago.
“Pension plans (defined benefit plans) are really becoming a thing of the past and mostly used today by tradesmen,” Michel said. “Companies have moved to 401K (defined contribution plans) because they are cheaper. So now it is up to an employee or individual to save for their retirement.”
As a result, many people are going to or have retired without adequate funds, he said. The reasons are numerous, but he said many people put themselves at risk because they either do not know how to invest, do not feel they can afford it or are under the impression that it is too late.
No matter their age or income, Michels encourages people seek help
“There is always a sacrifice for investing, but the more you can invest today the better off you will be tomorrow,” he said.
For those who believe they live paycheck to paycheck, Michels said there are always cuts that can be made today to save for the future.
“I'm a young guy but kind of old-school,” Michels said. “I believe in taking a piece of paper and pen and writing down every expense to see where every dollar goes. It is impulse buying that makes people feel like they are living paycheck to paycheck.”
He said when unnecessary spending is identified, cuts can be made and positive cash flow (even as little as $10 or $20 a month) can be redirected for investing.
Starting anywhere is better then nowhere, and he said the earlier this is done the better.
According to Michels, a 25-year-old saving $5,231 a year (assuming an 8-percent return), they can expect to have a million dollars at retirement. All things equal, a 35-year-old would have to save $12,618 a year, and a 45-year-old would have to save $34,678 a year to get the same results by retirement.
“There are people who work for money, and people who let money work for them,” Michels said. “You really need to be a little bit of both (to retire comfortably).”
Of course, a million dollars today is not what it was even five years ago. With life spans increasing, Michels said it is vital to not only have a plan, but to be disciplined enough to stick with it.
“People with a plan always end up with three times more at retirement then those without,” Michels said. “Long ago people would retire and just sit around. Now they want to travel and see the world, so if you want to ensure a comfortable lifestyle in retirement then you will need at least 75 percent of your annual income (as when you were working).”
He said most people are surprised when they learn how much they can put away for retirement despite their circumstances.
Interestingly enough, he said wealth is not only attainable but realistic as most millionaires in the United States have annual incomes of about $60,000.
“It's not what you make, it's about what you keep,” Michels said. “You need to plan for tomorrow today.”