Where Do you Go for Financial Advice?
Traditionally, retirement programs have focused on the need to accumulate as much money as possible for retirement. Unfortunately, participants tend to focus on how much they can "afford" to set aside for retirement, rather than thinking about how much they will have to have set aside to live on in a retirement that can be two or even three decades long.
Studies repeatedly show that participants who have taken the time to try to figure out what they need for retirement are nearly always more confident about their prospects—and feel better about their retirement savings programs generally. However, getting them to take the time to "do the math" can be a real challenge.
There are many sophisticated financial calculators available that can offer a relatively precise, inflation-adjusted assessment of the replacement income result for individual participants. However, for many participants, the high-tech approach can obscure the reality of the calculation. For others, the sheer size of that number can become exactly the kind of overwhelming, daunting objective that results in a "do it later" reaction.
With this month's Know How, we try to put that goal in perspective—the perspective of having to set aside 20 years of paychecks for that "rainy day" that we all hope turns out to be sunny and relatively carefree. As always, your feedback is appreciated.
—Nevin E. Adams, JDeditors@plansponsor.com