MONEY & ENTERTAINMENT

It used to be that one could wait at least until the student loan demons had finished slowly sucking your financial life-force dry before you had to start worrying about saving for retirement. Now, financially advanced parents are starting their children on savings plans along with their first jobs. For the rest of us, who had normal, financially impaired parents, who themselves are just now starting to realize that “Freedom-55” is only for those who started with “Frugal-15,” they can read along as we all learn how to start saving for our retirement way too late.

I’m not sure when was the first time I woke up in a cold sweat, realizing that with my current debt, there was no way I would be able to meaningfully contribute to a retirement fund until about my mid-30s. It was probably after talking to a couple of friends and finding out they had been contributing since their first paper routes (I spent those earnings on important increases to my blood-sugar levels). It was also young enough that my mid-30s seemed far enough off that I was able to get back to sleep. Not so much anymore.

I knew that in our debt-languishing culture, there was no way that I was the only one to find him- or herself in the situation of being more than halfway to my desired retirement age with little more than pocket lint and a feeble smile to show for it. It seems I am going to have to raise my desired retirement age over 45 and get with the program.

Goals
The fist step to setting out a plan is to establish your retirement goal. You don’t need a precise amount: a ballpark figure is one that you can begin working toward. A good general rule to follow is that, in order to maintain your current standard of living, you’ll need about 75 to 85% of your current annual income, per year retired. This is for the first year. After that, add 3% per year to allow for inflation. Better yet, in order to get a very general figure, use one of the many online calculators built to calculate this goal.

While you are contemplating this goal, think about how you see your retirement. While there are always things we can’t plan for (you could die tomorrow and all of this would be a moot point, for instance), think about how you see your retirement. Do you plan to start a small business to keep you busy? Will you move out of the city? Will you travel or stay relatively close to home? If you have a life partner, discuss these issues with him or her, so you know each other’s expectations and can plan for them accordingly.

Once have an amount in mind, pick yourself off the floor and wipe the panicked sweat from your brow, then make yourself feel slightly better by calculating what other sources of income you will have. Include in this your current savings; your projected Social Security benefit (and try to ignore the voice in your head reminding you that no one in your current government has given any indication that there will be security to be had); your pension and that of your partner; and any 401K or other employer-matched savings programs you have contributed to. Subtract that from your goal, and there you have it: your retirement savings gap (personally, chasm is more accurate, but you feel free to keep the more optimistic “gap”).

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The Plan
Once you have set your goal, you need to make a plan for yourself. The first step in this plan is to begin to track your current spending in order to find places you can trim the daily fat in order to pork up that retirement fund. When making this budget, list your retirement expenses first and budget from there, marking this as the priority. Besides looking at daily expenditures, look at larger issues in your financial life. Once your children have left home, consider moving to a smaller house (with its correspondingly smaller bills) and decreasing your life insurance. Drive your car longer, and, importantly, pay down credit cards and other debt. One of the largest roadblocks to retirement savings is wasting money paying interest on high credit cards. Make paying them off a high priority.

The next move is to look into the amount of the maximum annual contribution to any retirement savings plans (especially those that provide tax credits or exemptions like 401K, IRA or RRSP savings). If you have not been making maximum contributions in previous years, there is often a catch-up plan that allows you to carry over credits from previous years. Use these. If your employer has a matching savings program such as 401K and you are not currently contributing, do so. If you do not, you are giving up free money. And that’s not getting you into a 5th wheel in Arizona any time soon.

To plan all of this, meet with a financial planner (clearly, you need one). While you are there, discuss with them the best investment choices for your current situation. You will have to be a little more aggressive with your investments than if you had started 20 years ago. I know you’ve probably heard of a diversified portfolio, but what it actually means is that you balance your investments across higher-risk and more conservative investments. If you are 40 or thereabouts, you still have a good 25 years to let your investments grow, and many stocks, while they seem risky in the short term, yield growth overall in the long term. The important thing to do is to talk to a financial advisor—maybe even a few to see if opinions are diverse—and get your money out there at a regular, predictable pace.

Once you have done all of this, you might have to face certain truths. Investing is not always a windfall. It is a slow process that you are going to have to trust, yet that you are going to have to understand to some degree in order to keep eye on the lawn bowling ball. As you get closer, keep reevaluating your current state. I have learned much too late in life that bad finances don’t go away, no matter how long you avoid looking them in the eye. The only way to have some peace is to have knowledge and control over your finances. As you get closer to your goal date, you may have to face some tough decisions about working a little longer, working part time, or changing your standard of living for the freedom to relax. At least when you get to that geriatric fork in the road, you won’t get caught holding the suit, instead of the snappy cruisewear.

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