Where Do you Go for Financial Advice?
This month, Know How tries to help participants focus on the critical process of figuring out how much they need to have saved for retirement, rather than just focus on accumulating the amorphous "as much as possible." 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 program 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. This month, we used the perspective of setting out on a vacation trip to highlight the need to have set aside 20 years of paychecks for that "rainy day" that we all hope turns out to be sunny and relatively carefree. Let us know what you think.