Retirement Resolutions for 2011

Retirement Resolutions for 2011: Beefing Up That Three-Legged Stool

With the New Year right around the corner, hopefully many Americans are breathing a little bit easier. The economy is beginning to rebound, even if the unemployment rate remains high and housing prices remain stagnant.

But even should we see strong economic growth in the coming year, challenges remain in terms of Americans' retirement security. The "retirement income deficit"--the gap in the amount of money that Americans aged 32-64 have for retirement today and what they should have today in order to maintain their standard of living in retirement--was recently calculated to be an astounding $6.6 trillion nationwide, or about $90,000 for every American household.  

With that in mind, there are a few simple steps Americans can take right now to ensure their retirement planning is on the strongest footing possible for 2011.

Here are NIRS' retirement resolutions for the New Year.

1. Your Traditional Pension: First of all, do you have a traditional pension plan at work? If so, you are in luck--our research shows that middle-class Americans with income from a traditional pension are most likely to remain financially secure in retirement. Talk to your HR representative to make sure you fully understand your benefits and how they work--provisions such as vesting requirements, spousal protections, and payout options can be crucial to your retirement security.
   
   If you don't have a traditional pension plan at work, you may want to consider a new job that offers a pension. Over 35 million American workers had access to a workplace pension plan in 2007, so it is still possible to find a career that offers traditional pension benefits.
   
   
2. Your Individual Retirement Savings: Save, save, save for retirement! Even before the financial crisis hit--and certainly since--many Americans have not been saving enough to adequately fund their retirement. The median 401(k) account balance was just $43,700 at the end of 2008.
   
   If your employer offers a 401(k) or other type of workplace retirement savings plan, make sure you know what they offer in terms of a matching contribution. Do your best to contribute at least enough to receive the maximum match--otherwise you are needlessly foregoing some of your hard-earned compensation. Given the retirement income deficit, you may want to consider contributing even more--especially if you don't have a traditional pension.
   
   If your workplace does not offer a retirement savings plan, consider opening up an individual retirement account (IRA). With a traditional IRA, your contributions are tax-deferred. Also, any contributions you make until April 2011 can be counted toward your 2010 tax return.
   
   
3. Your Social Security: Social Security still plays a central role as a source of retirement income for most Americans. Yet scheduled increases in Social Security's retirement age will mean lower benefits going forward. Given this context, it is important to familiarize yourself with the debate that is currently happening in Washington.
   
   The President's Deficit Commission recently proposed substantial changes to the Social Security program, including raising the retirement age even further and incorporating all state and local employees into the program. If you have concerns about how these changes will affect your retirement plans, contact your representatives in Congress and make your opinion known.

By taking these simple steps now, you'll be doing your part in "beefing up" your three-legged stool of retirement security, not just for the new year, but for the long term.

Perhaps the New Year should include a new role for policymakers as well. In March, NIRS will convene its second annual retirement policy conference, entitled, "Policy at the Crossroads: Ensuring Economic Recovery Strengthens Retirement Security." The conference aims at answering a central question: Will a rising economic tide lift Americans' retirement boats? Or will policymakers, plan sponsors, and service providers need to employ new strategies to restore America's retirement readiness? The conference will explore the most promising public policy approaches and private-sector initiatives to enhance retirement security for more Americans.

Until then, we hope you will use these Retirement Resolutions to better ensure yourself a happy, healthy, and secure retirement--and a little bit more peace of mind in 2011.

[Source: Article Excerpted from National Institute on Retirement Security on January 7, 2011]