Stop Worrying, Start Building: A Midlife Guide to Retirement Confidence

It is very pleasing to me to see my children and most of their peers are very interested in preparing for their retirements. With the knowledge they are not going to get a pension, they are doing a better job than us boomers, contributing regularly to their 401(k)s early and taking advantage of company matches. Well done. More has to be done to help those who don't have 401(k)s, they are going to have a very hard time surviving.

Great points. Keep in mind that you may be spending 20 or more years in retirement, so along with "Do I Have Enough" and "Have I Had Enough," be sure you are confident that you can answer "Do I Have Enough to Do." This is an area of planning that many people don't seriously consider. You may have 20 or more years to happily and purposely fill the gap that working provided. Jan Cullinane, author of The New Retirement: The Ultimate Guide to the Rest of Your Life (Wiley) and The Single Woman's Guide to Retirement (Wiley).

A new report from CNBC finds that members of Gen X (born between 1965 and 1980) are in the worst shape when it comes to retirement preparation. Their typical retirement savings are only $40,000, which is far from what they need in a time with escalating healthcare and college costs. The oldest members of this generation will be 60 years old this year. Overall, 69% of Gen X workers said they were behind on their retirement savings, including 47% who said they were “significantly behind” — more than any other generation, according to a separate retirement report by Bankrate.
One of the big reasons why Gen X is in such trouble is that this sandwich generation grew up in an era when fixed pensions (defined benefits) were a commonplace, replaced by 40(k)s. Another is that they have lived through multiple recessions which interfered with their building nest eggs.

The times are difficult. There have been several key points in my life that seemed so bad it was impossible to get through. I fortunately got help the first time which showed me the way. Get up and do something about retirement. Start. Don't stop. This article is a great pathway.

I have always wondered why retirement investments are not taught in school. Our parents could not teach us because no one taught them. How to learn about a rather complicated subject, all on our own, seems a ridiculous omission in our education. Yes, there are books, but I am an avid reader and the books were impossible. I found myself reading the same paragraph over and over, and not retaining it, ultimately giving up. Maybe it was the writing, but I tried learning in good faith, and those living paycheck to paycheck cannot afford financial advisers.

Patricia, it's true no one taught our parents about investing for retiring, but many in that generation figured it out. In my late twenties, a close family friend talked to me about it when I was at his mortgage-burning party. He gestured to his house and told me that without having a paid off house, retirement would be very difficult. I never forgot his advice and advised my children likewise.

When in my 40s and 50s, if someone asked me how I felt about my financial retirement position, I'd have reported being unsettled. However, by the time I hit my early 60s things were looking up.

Not to get overly political here, but my children — all in their 40s — have significant 401Ks that they've plugged religiously since their mid-twenties. Nevertheless, all have great anxiety about their lives and finances being negatively affected by impulsive federal leadership that changes the rules overnight.

Their generation is buzzing amongst themselves about this being the second Gilded Age that will shortly be followed by some manner of Great Depression. Our concern that they might be right has kept my husband and me in our large, paid off house, so if things collapse we can muster through together.

JCarol: I'm happy that you and your children are going to be okay. But I remember interviewing in large law firms all over San Francisco and every one of them said that no, they didn't have a 401k plan, but they were looking into it. There was a substantial gap between the disappearance of pensions and the onset of the alternative 401k plans. They are still not teaching retirement investment and planning in school.

Patricia, I apologize for being unclear. I never had a 401K or a pension. When working for other companies in the 1970s & early 80s, 401ks didn't exist and few private employers still offered pensions. Mine sure didn't. However, many offered good (free) medical insurance, including my employers. Adding my husband to the policy was relatively inexpensive.

Come the mid-80s, our small business supported us so I didn’t work for others after that. Retirement savings were managed the old-fashioned way, i.e., without corporate assistance. Eye-watering medical insurance premiums increased steadily while coverage eroded. That is, until the ACA was passed. Thank heavens for that law.

My children work for medium to large companies. All have had 401Ks since graduating college and transitioning from part-time jobs to career work.

I agree – big changes in the 1980s made life much harder for the 99%.

Somewhat paternalistic attitudes toward employees shifted to an unapologetic, laser focus on corporate greed with the bonanza to be shared up, not down. Board members, C-suite executives and stockholders benefited, but woe to lower level employees. Some were laid off to improve the bottom line, so remaining employees’ workloads increased while their compensations remained static.

I don't disagree that general investing, money management and financial planning should be taught in high school (few 16 year olds can project 50 years forward, so maybe not a heavy focus on retirement).

Note: Unfortunately this discussion turned a little political and not relevant to retirement prep. So we edited a few comments and deleted another one that responded to it. Sorry about that - let's keep to planning - it's hard enough!

Admin, I appreciate the efforts to manage out politics -- Thank You!
BUT ... There are thousands (millions?) like me who have tried to reasonably prepare for retirement, have weathered some of the vicissitudes of retirement, yet now live with some despair, considerable shock and basically non-stop concern (at a minimum -- many face non-stop worry) that the political situation, including attendant inflation, appears to be actively intent on destroying our futures. How do we "retirement plan" for this?

In answer to my own question, read "The Diary of Anne Frank". Imagine what her retirement plan or her family's might have been.

Admin, if you feel it necessary to edit comments it should be noted in the comment it was done and why.

Admin Comment: Fair enough. It is quite rare for us to anything, and we will mention it when we do. Good reasons why we do that came up recently when someone mentioned Ronald Reagan and Republicans in a bad way, which got a lot of other people hot under the collar. We took that comment out, it didn't add anything to the conversation while throwing gasoline on the fire. If a response to something that is either completely off target or gets into political rants or blatant conspiracy theories, we will delete it (and not mention that).

Simply put, we aren't a site where political opinions are welcome on either side. Let's stick to retirement and all get along together. Thanks for your patience and contributions to this site, one and all!

Admin, today’s incendiary politics are exactly what the ruling class have been striving for: to turn the commoners against each other so they won’t eat the uber rich. So now you can’t discuss a policy without insulting someone’s identity. Divide and conquer.

Admin, as long as you're doing a little editing, would you mind fixing a typo I made in my second post?

The ending phrase in my first sentence in the second to last paragraph should read, "with the bonanza to be shared up, not down."

I didn't include the word "up" toward the end of the sentence, a word that's important to my point. .

Thanks!

Admin: All set, glad to help.

Being well in to my retirement there are some things that I would have done differently when saving for it. The first is putting the max into a ROTH IRA. The RMD situation can really bit take a bite out of your retirement income if you have too much in a 401K especially since I can't see how taxes won't go up in the near future. This affects your taxes as well as Medicare costs. Returns from years of building investment income, pensions and SS can add up much more than you anticipated.

The second thing I would have done is enroll into a high deductible healthcare plan and max out an HSA that I would have used as a tax free investment plan. This involves investing it, not using it for expenses if possible. After 20 or so years of medium returns you'll have a good pool of money to use for future healthcare spending. A high deductible plan will cost you just as much as spending that money up front and if you don't have a lot of medical expenses you may pay less. JMHO

To Admin: Thanks for keeping politics out of the discussion. All of the political dogma on the Internet these days is exhausting.

Stevo, you point about maximizing Roth IRA is very important. Roth was new before we retired and we had only a minimum (~$1500) in that account compared to our primary savings. And yes, the RMD bite is big.

Admin Comment: So true. One of my biggest retirement mistakes was not putting more of my 401(k) contributions to Roth rather than regular. The short term tax benefit for contributions to regular plans to what those for Roths in the long term. Even for your heirs.

One limitation with the Roth is the income limits. If you earn above the income limit, you cannot contribute to a Roth thus are limited to the standard 401K and IRA. You may either realize the tax savings when younger/working and pay more taxes when older/retired OR pay more taxes when younger/working and save on taxes when older/ retired.