For many in the black community, saving for retirement is like achieving the American Dream – we know that some people are doing it, but for us, it appears just out of reach. Many people may think that social security will get them through their retirement years, but this is not the case for everyone. Social Security is meant to replace about 40% of your income. This is about half of the amount that you will need to retire.
Avoid Working in Old Age
The #1 reason to have a retirement plan is to ensure that you do not have to work as much or at all during your old age. As we age our bodies do not work as well as they used to. Some may experience physical limitations such as chronic pain or vision impairment. Others may experience loss of brain function caused by dementia or other mental health conditions. These health issues will limit the amount of work that one can do.
Having a retirement plan ensures that there is money available to pay for your housing and medical needs during this time.
Reduced Reliance on Family
Having a retirement plan will help you avoid being reliant on your children or other relatives to provide for you in your old age. Your retirement benefits can help pay for at-home care or assisted living arrangements so that you can have the help and support you need without relying on family.
Help Supplement Medicare
Once you are over 65, you may qualify for Medicare coverage to assist you with medical costs. However, there are gaps in Medicare coverage, so it will not cover all of your medical needs during retirement. Retirement income can help supplement your medicare coverage.
Enjoy Old Age
If you plan correctly for retirement, you may have enough saved in old age to enjoy traveling or crossing off things on your bucket list. After 30+ years of working, we should all have the opportunity to make the most of our retirement. Having a retirement plan will give you peace of mind so that you can focus on enjoying your final years.
Tips on Saving for Retirement
Having a retirement plan is important for securing your financial future. Here are some tips for mapping out your retirement plan.
- Start saving early. Depending on your state, you must be either 18 or 21 to contribute to a 401k plan. You should begin contributing to your retirement as soon as you are legally able.
- Find a job that offers a pension. Pensions are few and far between these days, but there are still employers who offer them. If you want to secure your future while easing your financial burden, try finding an employer that offers a pension plan.
- Choose multiple investment vehicles. Maximize your retirement savings by contributing the maximum amount in all retirement vehicles. For instance, you can contribute to an employer 401k and a Roth IRA at the same time.
- Make retirement savings a priority. Many of us place too much importance on material things that bring instant pleasure and not enough focus on future planning. It is important to make saving for retirement a priority and consider it when budgeting for large purchases such as houses or cars.
