Generation 42

Archive for October, 2009

You need not feel afraid about increasing your contributions to the maximum. None of these changes is cast in stone, and you could always change back if you felt you had to. Among all the people I’ve had do this, by the way, not one single person has ever regretted it—or changed his or her contribution back to where it was. You cannot afford not to try this out. There will be a day, you know, when you won’t be able to bring in a paycheck, and you must prepare for that day now.
Companies are offering 401(k) plans because most of them do not offer pensions anymore. When many of our parents retired, things were different. Back then, almost everyone received a monthly paycheck from their longtime employers after retirement_that’s why retired people were called pensioners. Also, even a generation ago people were not living to ripe old ages, the way we are now, and retirement was a shorter- term eventuality. For most of us, the pension check is a relic of the past.
If you’re counting on Social Security to see you through retirement, count again. That is not the most secure bet you could make. When Social Security was first created, the average life expectancy was sixty-two. The architects of Social Security expected that very few Americans would live long enough to collect it. Surprise! Now that the average life expectancy extends well into the eighties, most of us will spend more years in retirement than we ever did working. This is placing a tremendous strain on the Social Security system, and it’s quite possible—no matter what the politicians say now—that by the time you retire, Social Security benefits will have been reduced, if Social Security still exists at all. You, your money, and what you do with it today will be the only thing you can count on for your future. Since no one is doing it for you, you have got to do it for yourself. For most of the people who come to see me when it’s time to retire, the saving grace is their 401(k) or other retirement plan. Almost certainly it will be for you, too.