Retirement Savings for Late Starters

Written by Alan Lertzman

It's never too late to start saving!

The savings rate of most baby boomers is "in the negative," says Jess Pawlak, who has made a career of being an investment adviser to his fellow boomers. That lack of savings bodes poorly for boomers' retirement lifestyles.

"Lest we forget: We are an aging society and the media keeps reminding us that a member of our generation is turning 50 every 7.5 seconds," says Pawlak.  "This graying of America is changing the way we think and approach the entire investment arena."

Money Advice:
Estimate your retirement living expenses.
Add 4% annually to correct for inflation.
Prepare an investment plan to yield the projected total needed.
Pawlak, principal of Solution Consultants, Inc. in Cupertino, Calif., wrote his master's thesis on investing techniques ("Common Stock Investing Using Business Systems and Information Science," ). He says most of his peers don't realize that Social Security and pensions typically provide less than half of a retiree's income.

For those boomers who have delayed an investment program, Pawlak suggested they estimate their retirement living expenses, and then prepare an investment plan based on those projected needs.

"For example, suppose you are age 50 and have decided to retire at age 65 (or 15 years from now)," says Pawlak. "You estimate, using today's dollars, that you'll need $100,000 for retirement.

"You also assume that inflation is going to continue at the compound rate of 4% per year," he adds. "How many dollars will you need 15 years from now to equal $100,000 of today's dollars? The answer is $180,000.

"Put simply," Pawlak says, "if your goal is to have $180,000 in 15 years, you will have to invest $7,725 per year at 6%."

In addition to delaying retirement planning, Pawlak says some parents may underestimate the need for saving for a child's higher education. According to the U.S. Department of Education, a child's average cost of a four-year college diploma (tuition only) for 1994 was $27,112. A child born in 1994 and graduating in 2014 would spend an estimated $182,393.

We may not have to follow Pawlak's example and return to college to learn about investing. However, the real solution to the investment process starts with education.

Obviously, there is an increasing need for online classes and workshops on investment and financial planning. Baby boomers, in particular, should realize the need to seriously plan and implement their financial futures without delay.

Twitter: @SuccessTV

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