AICCCA Urges Working Consumers To Contribute To Retirement
Before Credit Becomes Their Only Option
Fairfax, VA — April 27, 2004 - According to the Employee Benefit Research Institute and the American Savings Council, 45 percent of all workers reported in the 2004 retirement confidence survey that their total household assets were less than $25,000. In addition, nearly half of workers who have not saved for retirement are not worried about how they will finance their retirement when they stop working. These numbers are staggering considering the importance that a savings plan has in keeping retired persons from abusing credit.
Retirement can be a great reward that you have provided yourself through years of saving. However, while many understand the importance of putting aside for retirement, others will be unprepared when the time comes. In order to avoid using credit to finance retirement, America's workers must plan ahead and budget early.
"People must ask themselves how they would like to live upon retirement," says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies (AICCCA). "The amount that you have in retirement savings can be crucial to supporting certain lifestyles."
Here are three suggestions that AICCCA recommends you consider when planning for retirement:
Determine how you want to live when retired. The answer will vary from person to person. Do you want to constantly travel or settle down in a quiet community? Bear in mind that traveling will most certainly be the more expensive of the two. In addition, it is important to make sure that you are not neglecting those simple cost of living expenses upon retirement. While a new RV or summer beach home may sound enticing, you must make sure that you can still cover your food and gas without placing these expenses on a credit card, for example. Decide how you want to spend your time when retired, and you will be prepared to map out a savings plan that fits your lifestyle.
Make certain that you will have enough money when the time comes. Is your current retirement savings plan going to be enough to supplement your cost of living once you retire? Remember that people are living longer, and if you retire at age 60, your funds may still have to last you 20 years or more. Your company's 401(K) plan may be an excellent retirement tool, but do not be afraid to make lifestyle changes in order to ensure that you are putting enough away to
maintain your current standard of living upon retirement. Use your age, income, and existing savings to determine where you currently stand in terms of your retirement savings. It is suggested that the average retiree will need between 65 and 75 percent of their pre-retirement income to maintain their current standard of living. However, this assumes that retirees will no longer be supplementing a child's income or still be paying house and car notes throughout retirement. Therefore, make sure that your retirement income can still cover these costs, if they are still in the picture. This way, you do not have to rely upon credit for new purchases or routine payments.
Take advantage of employer savings plans. One of the largest mistakes that an employee can make is to neglect taking advantage of matched savings plans that an employer may offer. When companies also contribute to your retirement plan, you may be turning away complimentary deposits. In addition, most retirement plans are tax deferred, and compound interest will add up tremendously over the years. While stashing money in a savings account may seem like a safe way to hold onto your retirement money, the small amount of interest that is accrued through a traditional savings account just isn't conducive to the amount that your existing money could be making. Also, savings account earnings are taxed every year, and you would be foregoing any tax deferred status.
It is important to remember that different retirement expectations will call for different levels of savings. The key is to assess your situation and keep an eye on the future. Smart budgeting now will ensure a secure retirement when the time comes.
Founded in 1993, Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services. AICCCA and its members are focused on improved creditor relations, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, counsel millions of consumers annually nationwide and provide debt management services to consumers with excessive unsecured debt. For more information or to contact an AICCCA member office call (800) 450-1794 or visit www.aiccca.org.
