Retirement and Savings: What Gen X and Y Should Know

If you are a twenty-something or thirty-something, you probably haven't given much thought to your retirement. Putting your feet up on your desk and dreaming about pool houses with pool boys doesn't count. That's fantasy. Sure, you put some money away in a 401k and maybe even save a little on the side. But bills have to be paid, flatscreens need to be bought, and their is a never ending itinerary of things to do. The 401k and savings plan are both very good and responsible things to do, but if you haven't planned out your retirement- how do you won't know if that's enough?

The first step, is to really figure out what you need when you retire. How much money do you want to live on? Are you thinking of just sitting in a 4th floor walk-up eating cat food, or are you more interested a condo with a maid in the Keys? Figure out a goal sum.

If you need a quick picture of how much money you are actually spending, go grab your last twelve bank statements. Add up all the withdrawals (All the withdrawals, don't omit that emergency $5,000 you pulled out). Use that number as a ballpark for what kind of income you need a year in retirement. If you know you are going to downsize, or your mortgage is paid off in a couple months you can subtract a little off that number, but I'd leave it all in. People tend to think they will spend less in retirement then they do now, however, many people spend as much or more then they do currently. Medication, new hips, and early bird lunches are just as expensive as your current go-go hot lifestyle.

Here is a retirement picture as simple as I can make it. When you retire if you want to have $100,000 dollars a year in income you will need to have $2,000,000 in the bank. $2,000,000 at a 5% return (what an average CD is paying now) = $100,000 a year in income PRETAX! After the government gets done with you, it's probably only worth $75,000. Thanks Uncle Sam!

For those of you astute enough to catch what I omitted above, if you retire with $2,000,000 in the bank you could pull out $100,000 a year for 20 years before you were out of money. That is a little bit comforting, but if you are 20 to 30 now, you are probably going to live into your 90s without a problem. If you retire at 65, that's a minimum of 25 years in retirement. Falling short of your dream est egg is okay, we can all budget. But falling so short hat you have to take a part-time job at the Kwiki-Mart, maybe not what you planned.

And here is an upsetting fact that you are probably all to well aware of; nobody has any idea where social security is going to be in the future. Money that is going into that Social Security Account, might not be there for you. It might, but with those darn Baby Boomers ahead of us,,,It might not. Face if friend, Generation X, Y and Z need to take care of themselves.

Now that I have your attention, here is what you can do about it. If your employer sponsors a 401K plan make sure you take part in it. Yes, make the sacrifice now. Drop the sum in that you would spend on a case of Pabst at least. Also, be clever...Here is the other huge part that most people miss: If your employer matches your contributions, let's say they match 100% of your contributions up to a 5% deferral from your salary; make sure you put in at least 5% of your salary!!!! That is a 100% return on your money instantly. Here is a better way to describe it: FREE MONEY. In the market a return of over 10% is a damn good year. Even if your employer matches 25% for 3% of your salary that's still a 25% return right away. Make sure you put in as much money as your company will match. Those bastards make you show up everyday and work under those hideous fluorescent lights, right? Take advantage of every single thing they give you! Take the free money! If you don't have a 401k at work, go out today and start your own IRA and put in the maximum contribution every year (between $4,000 and $5,000 for 2006).

Another good rule of thumb; if you are going to go splurge, there is this Versace suit that you have to own, put away in a retirement account just as much as that suit costs. It will keep you from spending undo money. Can't afford the Versace suit and dumping some money into your retirement fund? Then maybe you don't need that Versace suit. Try to make your savings fund and retirement nest egg a priority. You will need that money in a couple decades. What will your Versace suit be worth in 30 years? Moth food baby, just moth food.

If you need help planning all of these things, go get help. There is lots of help available. You'll find thousand of good financial counselors in any newspaper or phonebook. If you went to any halfway decent school, one of your old frat brothers or dorm mates is probably in the financial arena. Check out facebook, you'll find a bazillion money men and girls. If you are a do-it-yourselfer, hit the web, You'll find a million calculators all over. Check out www.dinkytown.com I use this site all the time for simple retirement and savings calculations.

So this Sweekend, in between college football, take 30 minutes to use some calculators, call a professional, get a retirement picture and know where you are headed and how to get there. I'm headed to Cali as soon as I get gray, and I'd hate to not be able to live in The Hills.