Let’s start with the depressing news, which isn’t exactly a “newsflash”: We’re falling short on retirement. You can find articles on this all over, from the Wall Street Journal to the Huffington Post. Folks either don’t have access to retirement accounts through work, aren’t saving enough, or don’t know what to do with the retirement investment choices they do have access to. Even worse, many employers make employer matching contributions to their employees’ plans but this is money that’s wasted if you don’t take advantage of it!
The Sad State of American Retirement
First, some numbers. You can reach me here if you want access to the background materials:
- Almost 70% of civilian workplaces offer some type of retirement plan. But (depending on the source) only between 43% and 54% of workers participate in these plans. For more on civilian retirement see the Private Sector Retirement section below.
- Nearly half of American families have no retirement savings.
- 81% of people leaving the military leave with no retirement savings. For more on military retirement see the Military Retirement section below.
- For retirement plans other than traditional pensions (like 401Ks or 403Bs), the average balance is almost $96,000. But averages are lopsided because some people have high balances while other people have low balances. So, the average balances seem higher than many peoples’ actual balances.
- A better measure in this case is the median. The median balance for retirement accounts for people aged 56-61 is $17,000 and for people 44-49 it’s only $6,000.
This is a problem. What are the implications?
- You work past the age you would otherwise choose
- Working a part-time job
- Moving to less-expense housing or less expensive locations
- Greatly cutting down on your spending. And maybe on your eating
- Instead of saving now you “hope for the best” for later
Military Retirement: Take The Money!
The Thrift Savings Plan (TSP) opened for business in April 1987. But when I got out of the Navy in 1989 after eight years of service I’d never heard of it. The only retirement that I knew about was the traditional serve-20-years pension, or the “legacy retirement system”. So, except that I’d opened my own retirement account (completely outside the Navy), I had nothing in retirement savings to show for my years of service. I’m not alone: 81% of service members leaving the military today leave without any retirement benefits.
If you joined the military after January 1, 2018, you’re automatically enrolled in the TSP and your contribution is set at 3% of base pay. Also, if you have fewer than 12 years of service as of December 31st 2017 you can join the TSP and keep your benefits under the old system. You can also contribute up to 5% of your base pay with your branch fully matching your 5% contribution!
Here’s my biggest tip, especially if you have the choice to opt-in to the TSP but don’t take advantage. If you leave the military before 20 years and haven’t opted-in, you won’t have a retirement fund from your years of service.
And even if you joined after January 1, 2018 and were auto-enrolled in the TSP you can reduce or stop your contribution to the program. This means that no matter how many years you were in, you’ll only have a small retirement fund from those years of service.
So, if you’re eligible, please consider contributing to the TSP!
Those Wonderful, Horrible Numbers
I could hit you with more numbers about your possibilities for retirement under the TSP, but in the end, after writing all of it down, we’d both be dizzy! Don’t fret though, I’ll do a separate post with more info about the TSP so that we can really geek out on the numbers! I think the effort will be worth it. Until then, the magic of the TSP is that your success under the program is largely under your control since the more you contribute the more your branch of service will match. So please consider maxing your contribution to the TSP at least to the level that maximizes the government’s match. And keeping that habit going after you get out of the service can make you very happy in the future! Don’t believe me? Contact me here for a free 30-minute consultation and we can discuss your options under the TSP. Just remember: MAXIMIZE YOUR CONTRIBUTION AND TAKE THE MONEY!
Private Sector Retirement: Take The Money!
In the private sector it’s tougher to determine retirement outcomes because not every job offers a retirement plan; even if they do offer a plan not every job offers an employer match to your contribution; and even if there is a match, the terms can vary by quite a bit.
But there’s a bottom line here too: if your employer offers a retirement plan, please consider participating. And if your employer offers any kind of match to the contribution that you put in, MAXIMIZE YOUR CONTRIBUTION AND TAKE THE MONEY!
There are at two reasons main reasons people have told me about why the wouldn’t maximize the contribution to their workplace retirement plan or might not even participate.
- It’s hard enough to make ends meet today without putting money towards retirement in the future
- Even if they put money into the plan they don’t know what to do with the investment options in the plan
So, here’s my bet: with a dedicated financial coach you can find money within your current resources to contribute to a retirement plan. Having trouble finding a coach? May I suggest clicking here? And yeah people that’s a link to me. For Pete’s sake, I’m in business here!
That leaves what to do with your investments. The way financial services work today, many advisors will only work with you if you have lots of money to invest. This leaves a lot of people on the sidelines of the financial system. May I again suggest clicking here? I don’t have a financial product to sell, but I do have knowledge and empowerment to offer you. So, if finding ways to manage and maximize your investments is on your mind, please get in touch! And we’ll look at much more info about investing in the future!
Still thinking it’ll be hard to fund your retirement? Please join me next week as we look at enough savings strategies to choke a horse! I’d be honored if you continue on this journey with me, and thanks SO MUCH for joining me this week. I really appreciate it.
If you have questions or just want to chat, please schedule a 30-minute free consultation by clicking here or by visiting https://andyproctor.com/schedule-your-free-consultation/ .