Retirement Savings a Challenge for Most

We are of the most educated countries in the world and yet we are severely lacking in financial literacy. As a result most people have no idea how much money they need to save for a retirement. Here are a few of the common mistakes that people make:

* Overspending
* Not putting together an automatic savings plan that goes straight into a savings account you don't touch until you retire
* Not maximizing their IRA or 401k's (especially those that match funds)Thinking they will live shorter than they actually do
* Assuming the government will take care of them
* Assuming their family will take care of them
* Underestimating the impact of inflation
* Underestimating how much money they will need
* Underestimating what their health care costs will be during retirement and what coverage they will have

* Not diversifying their portfolio to allow for more risk early in their savings career
* Not working with a financial professional
* Not providing for a spouse after their death

Who is to blame?

* Those with scant nest eggs should blame themselves when it comes to poor savings habits.
* The government could have stimulated more saving early on with additional tax incentives.
* Corporations could have motivated more people to save by matching 401k funds.
* Educational systems could have provided more personal finance education during our learning years.
* Financial service companies could have spent more money educating their customers about retirement and selling the correct basket of products that would help them create this goal.
* Corporations could have left pension plan funds alone during
bankruptcy (instead they siphoned them off leaving seniors in the lurch).

I don't think it is ever too late to right the ship. One might not be sailing at full speed and be able to retire early or all, however with a good holistic financial plan matched with one's life goals, it is possible to live a happy life. It might mean cutting back to some of the bare necessities in life and foregoing the extras. With a good attitude, a savvy shopping strategy and the ability to courageously make some serious life changes, one can turn a bad retirement situation around.

By 2044, the ratio of workers to retirees could be 2:1. In 2000 it was 3:1.
This will be a heavy burden on the Gen-X/Yer's to cover retirement benefits,
health care coverage and nursing homes for the elderly.

My hopes are that Gen-X/Yer's will rise to the challenge and start socking away more money than their parents did at an earlier age so they can see the benefits of compounding interest and have the ability to take a higher risk. However, we just are not seeing that happen. They are trying to save for their children's college and caring for their parents at the same time as saving for their own retirements. With the rising costs of college and health care for their families as well as the financial burden of elder-care, they aren't coming up with a whole lot of money left over at the end of the month.

These generations did not grow up with the thought that government would take care of them and will most likely treat Social Security as a bonus, if they receive any at all. This should be a big motivator for them to take control of their own financial situation and take advantage of the tax incentives for long term saving and investing. I think it general this crowd is able to adjust to change better than previous generations and will treat retirement as an opportunity to explore new less demanding careers that will still bring in some sort of cash flow during those golden years (since they probably won't be able to afford not working at all).

If you want to see my one hour presentation on Retirement (and powerpoint) I
did a few months ago in front of a live audience of 300 visit:
http://www.msmoney.com/harmoney1.htm