Retiring Procrastination

There’s an old joke about saving for retirement and it goes something like this:

“My accountant assured me I have enough money to live on for the rest of my life; provided I die by 5 o’clock this afternoon.”

I’m here all week ladies and gentlemen.

Now all kidding aside, it’s estimated that more than 100,000 CPAs perform some type of financial services for their clients – from simple product referrals to more complex estate planning.

And yet I find it astounding that even without the luxury of a personal financial planner there is virtually an infinite amount of free information about investing for retirement, money management, debt avoidance and everything in between that remains largely overlooked.

I read an article last week that unveiled, sadly, it’s not only the 20-somethings who are literally placing retirement savings on the proverbial back burner, but roughly 30 percent of folks over 55 surveyed by GoBankingRates, have no retirement savings whatsoever.

Let me repeat that for emphasis: 30 percent have nothing for a rainy day.

Zero.

Adding to that financial malaise, some 26 percent reported that their retirement savings balances are less than $50,000.

So by those calculations it’s hardly a stretch to say that more than half of those surveyed will largely have to depend on Social Security payments to fund their respective retirements.

That’s the bad news.

Here’s the worse news – Social Security by design replaces on average just 40 percent of the average American’s pre-retirement income. Most financial planners (CPAs and otherwise) will tell you that one needs at least 70 percent to 80 percent of pre-retirement income, once we clean out our desks for good and work on our golf handicap.

And if you couple that minimum required percentage with regular medical expenses, the needed might inch closer to 90 percent.

Next question: If someone offered you free money with no strings attached would you refuse?

I doubt it. Yet by not taking advantage of a company’s 401(k) match which many 20 somethings are inexplicably doing, you can potentially lose thousands in savings.

For example, let’s say your company’s 401(k) contributes up to $1,000 a year in matching funds. If you decide to forgo that, you not only lose out on building principal, but could lose more than $20,000 of free money over a 10-year period even at a modest annual return of 5 percent.

You don’t have to be one of the 100,000 or so CPA financial planners in the country to understand the foolishness of passing on an opportunity like that.

Someone far brighter than once told me – it’s far easier to begin saving early than trying to play catch up in your golden years.