As we approach the end of the year, many people are taking stock in their finances. You don't need millions of dollars to retire comfortably, but financial advisor Jonathan Pond says you really do need to plan ahead. One of the easiest things to do is to take advantage of your company's 401K, otherwise you're just throwing money away. "I'll be more blunt. You have cement between your ears if you don't take advantage of it because of its tax advantage. And it is comprising a major asset in somebody's life."
Pond says people are living longer, and need more money to do that. He says baby boomers are seeing their parents run out of money, or lose ground due to inflation. Important decisions need to be made during your working years and beyond. "There seems to be a big disconnect, particularly among baby boomers, as to what they're going to do with that money when they ultimately retire. 'Are they going to manage it themselves? Are they going to put it into an annuity?' There are a number of choices that need to be made."
Financial expert Brandon Buckingham says people simply cannot rely on Social Security and traditional company pension plans. Only 17% of Americans are covered by a traditional company-sponsored pension plan that provides lifetime coverage. The rest of us are on our own! "You have this baby boom generation who now have to create their own 'personal pension plan' if you will. Invest their 401k assets, their IRA assets, their other retirement assets in such a matter that's going to last them throughout their retirement years and provide a guaranteed stream of income during those years. And that's going to be the real challenge for these baby boomers."
Buckingham says some insurance companies can offer a guaranteed stream of income while allowing you to invest in the stock market. Pond says you could start small if you need to. And even little changes can make a difference. "How beneficial it is to defer retirement just by a few years can nearly double the amount of income you'll enjoy in retirement. … Social Security check will be bigger, you'll have more time to save, you'll have more time for those savings to accumulate."
Direct deposit is a hassle-free way to save and organize your money, and you should put pre-taxed dollars in the company Flex plan for medical expenses. Pond says it's never too late to start saving for retirement, and besides, he says, what choice do you have?!
NOTE: Financial expert Jonathan Pond is the author of " You Can Do It–The Boomer's Guide to a Great Retirement ."