Retirement Planning For Dummies

Matthew Krantz

• Publisher: For Dummies
• Year: 2020
• ISBN:
  9781119627623
• Edition: 1
• Topic: Personal Development
• Subtopic: Personal Finance

Advice and guidance on planning for retirement

Retirement Planning For Dummies is a one-stop resource to get up to speed on the critical steps needed to ensure you spend your golden years living in the lap of luxury—or at least in the comfort of your own home.

When attempting to plan for retirement, web searching alone can cause you more headaches than answers, leaving many to feel overwhelmed and defeated. This book takes the guesswork out of the subject and guides readers while they plan the largest financial obligation of their life.

• Take stock of your finances
• Proactively plan for your financial future
• Seek the help of professionals or go it alone
• Use online tools to make retirement planning easier

Whether you're just starting out with a 401(k) or you're a seasoned vet with retirement in your near future, this book helps younger and older generations alike how to plan their retirement.

Part 1

Getting Started

IN THIS PART …

Put away your fear of retirement planning and learn to look at it as a positive way to build your future.

Gain a better understanding of your run rate, or how much you spend on a regular basis.

Determine how much you’ll need for retirement.

Learn the unique characteristics and benefits of various retirement accounts.

Measure how much risk you can tolerate in your retirement plan.

Chapter 1

Retirement Planning Is Up to You

IN THIS CHAPTER

Understanding the importance of retirement planning

Seeing how retirement planning has evolved

Discovering the new role for employers in retirement planning

Finding out how defined contribution plans have taken over pensions

Getting an understanding of why Social Security isn’t enough for a comfortable retirement

If you’re like most people, you want to retire someday. You might love your job and plan to work well into your 70s. Or maybe you’re part of the financial independence retire early (FIRE) crowd and want to escape your corporate ball-and-chain at 40 years old. The beauty of retirement planning is that the timing of your retirement could be up to you.

The goal of this book is to help you get excited about retirement planning. All too often, people are fearful of saving and investing for retirement. You might fear that you aren't saving enough or that you’ve started too late. Fear, I’ve found, isn’t a great motivator. Instead, it causes retirement-planning paralysis.

In addition, some people get so discouraged about being off track with their retirement planning that they just give up. They figure they’ll never catch up to where they think they need to be. Cautionary tales of people who have not saved enough only make people more depressed. You can find lots of those stories. Maybe people you know shared their stories with you.

Put the fear and discouragement aside for a minute. This retirement-planning book is different. I want you to embrace, not dread, retirement planning. What better way to plan for the future than picturing what you want it to look like and then making it happen? Expectations must match reality, but you might be amazed at what you can do when you set your mind to a goal.

Retirement planning is an important way to plot your financial course. And the course you set by reading this book will help make sure that your life 20, 30, 40, or 50 years from now is what you think it should be.

In this chapter, you find out why retirement planning is largely an opportunity for you to plan your own future, rather than have it dictated to you by your employer or government. You also see why getting your plan started as soon as possible pays off in a big way.

Blazing Your Own Retirement Plan

Retirement planning is simply about making sure you have resources available when you’re no longer generating them from your labor. However, the financial industry hijacked retirement planning, and now it’s all about deferred tax accounts, 401(k)s, and mutual funds. It wasn’t always that way.

More than a hundred years ago, more Americans relied on direct labor for their basic needs. In the late 1800s, for instance, about half of Americans were involved in farming. Back then, retirement planning was “an heir and a spare.” You wanted to make sure that you had enough kids to keep the farm running after you no longer wanted, or were able, to push a plow.

But now, less than 5 percent of the population touches food before it arrives at the grocery store. And people are more mobile, so your adult children are just as likely to live on the other side of the state as in your basement. In addition, birthrates are falling as more people decide against having children.

These shifts have turned money into the currency of retirement planning. Rather than having a house full of children who will take care of you in your grand old age, retirement planning is about having enough money when you can no longer work. Famous investor Warren Buffett addressed the importance of putting your money to work when he said, “If you don’t find a way to make money while you sleep, you will work until you die.”

Measuring Your Lifespan

Adding to the planning complexity is the fact that Americans are living much longer than they used to, as shown in Table 1-1. That news is great for humans, but it also means retirement planning for most people must stretch an additional 10 years or longer.

TABLE 1-1 Life Expectancy of Americans

Year You Were Born	Life Expectancy (Both Sexes Combined)
1955–1960	69.66
1960– 1965	70.11
1965– 1970	70.36
1970– 1975	71.43
1975– 1980	73.25
1980– 1985	74.37
1985– 1990	75.89
1990– 1995	75.65
1995– 2000	76.47
2000– 2005	77.18
2005– 2010	78.19
2010– 2015	78.94
2015– 2020	78.81

United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects: The 2019 Revision; custom data acquired via website.

If you want to slice-and-dice life expectancy data to glean more precise insights about typical lifespans, you’re in luck. The United Nations’ World Population Prospect data query tool is a treasure trove of life expectancy data. You can ...

Table of contents

• Cover
• Table of Contents
• Introduction
• Part 1: Getting Started
• Part 2: Using Online Resources
• Part 3: Maximizing Your Retirement Knowledge
• Part 4: The Part of Tens
• Index
• About the Author
• Connect with Dummies
• End User License Agreement