As the boomer generation enjoys its retirement years, those following them are a bit worried. While not yet in a complete state of panic, they are planning for retirement during uncertain times, which is causing some anxiety. There is a good chance that, even though they may not be that far from retirement age, they have not yet set themselves up to be financially comfortable once it arrives. The good news is that it's not too late to get started, especially when using something like the F.I.R.E. method for planning.
"The next two generations up for retirement have faced different situations and need to plan differently," said Jeff Smith, a financial planner and owner of The Retirement Smith. "It's important to take it seriously and stop worrying about the fact that your plan should have already been mapped out. You can get started right now and still be comfortable at retirement."
Many people in the boomer generation are currently enjoying a retirement that provides them with pensions they earned over the years of their working lives. That system made it easier for them to plan for retirement. Today, things are different for those in Generation X and the Millennials who follow.
According to the National Institute on Retirement Security, Generation X is the first generation to enter the labor market after a shift occurred from workers essentially receiving pensions to them contributing to 401(k)-style accounts. They report that the bottom half of earners have only a few thousand dollars saved for retirement, while the typical household has around $40,000 saved for retirement. Even with what people will be able to (hopefully) get from Social Security, it may not be enough to continue providing for their lifestyle through retirement years.
With a dismal retirement outlook, many are seeking ways to level up and be prepared, even though they recognize they are late in the game. One of the methods many people are turning to to secure their retirement finances is referred to as the FIRE (Financial Independence, Retire Early) movement. According to Investopedia, this is a financial movement defined by frugality and extreme savings and investment. The plan takes the person's annual living expenses and multiplies them by 25 to get a FIRE score. Once people invest and save enough to reach that FIRE score, they can retire and then begin withdrawing 3-4% of their savings each year to cover their living expenses. The plan typically helps people retire early, but most people end up saving around 75% of their yearly income to make it happen.
There are several FIRE retirement variations, with something to meet most people's goals. These include plans for those who don't want to reduce their current standard of living, those devoted to minimalist living and extreme saving, and those who fall somewhere in between the two. Working with a financial planner is the best way to find the variation that works for each person and to ensure that it is properly planned and executed.
"If you are worried about your financial future during retirement, feel you are behind, or want to retire early, consult with a financial planner," added Smith. "This is the best way to ensure a successful plan that meets your needs and will provide the desired outcome."
The Retirement Smith serves those in the Fredericksburg, Va., area and beyond with individualized financial planning. Their motto is to treat people how they want to be treated, and they aim to ensure there are no gaps, people have the answers and solutions they need, and they will not fall short in their retirement years. They offer retirement planning, income planning, and life insurance. They provide a free color-coded money risk analysis and focus on the three major phases of retirement financial management that people typically experience, including accumulation, distribution, and preservation. They also offer a Balanced Retirement book to help people plan for a successful retirement. Smith has recently joined with his wife, Jennifer Scherer, owner of Fredericksburg Fitness Studio, to create a podcast that focuses on fitness and finances. For more information or to schedule a complimentary consultation, please visit our website at: https://www.theretirementsmith.com/.
