Monthly Finance Message:

Small Steps to Enhance Your Retirement Security

October 2011

Barbara O'Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension


In recent years, dire predictions have been reported by various media outlets about the ability of baby boomers (and younger generations) to maintain their standard of living in retirement. Some have used the phrases "potential train wreck" or "perfect storm" to describe what lies ahead as people live longer with meager savings and less support from employer and government benefits. Many reports cite research by the Center for Retirement Research (CRR) at Boston College which invented the National Retirement Risk Index. According to the CRR, over half of U.S. households are at risk of being unable to maintain their pre-retirement standard of living during retirement.

What to do? Do something. If you're concerned about your future financial security, any savings or other preparation for retirement is better than none. Below are some suggestions from a recent article in the Journal of Financial Service Professionals:

  • Participate in a qualified retirement savings plan, such as a defined-benefit pension or 401(k) (if available through your employer), and their "first cousins" SEPs and SIMPLEs (for small businesses) and 403(b) plans (for workers in educational and non-profit sector jobs).
  • Consider moonlighting part time to earn "Schedule C" income in addition to "W-2" income from an employer. Many people are able to turn their "day job" skills or hobbies into a secondary income source as well as take additional tax deductions for business-related expenses.
  • Take advantage of available catch-up retirement savings contributions if you are age 50 and over. In 2011, you can save an additional $1,000 in an IRA (up to $6,000 total) and an additional $5,500 in a tax-deferred 401(k), 403(b), or 457 plan (up to $22,000 total). Save as much as you can when you can.
  • Remain in the workforce longer if possible. The current average national retirement age is 64. Remaining in the workforce longer provides a number of benefits: extra time to save for retirement and accumulate assets, higher Social Security and/or pension benefits, and a decrease in the amount needed for retirement (by shortening the length of the retirement period). A later retirement also combats long-term inflation problems by shortening a retiree's exposure to inflation's eroding impact.
  • Don't procrastinate. Start saving something...today. The earlier you can put money aside, the better, due to the awesome power of compound interest. How do you find money to save? Financial planners recommend "living below your means." Instead of spending 100% (or 110%) of your salary, try living at 90% (or less). Saving a dime for every dollar earned may be simple advice, but it's effective.
  • Don't miss out on an employer match to your retirement savings. It is "free money" and a valuable source of wealth accumulation. A typical employer match is 50 cents for every dollar that workers contribute up to 6% of their pay. This is an automatic 50% return on your money.
  • Calculate the savings needed for retirement. This will help you develop a savings plan. One easy print or online retirement savings calculator is the The Ballpark Estimate.
  • Type the words "Life Expectancy Calculator" into an Internet search engine and try a few to see how long you might live. Ironically, people with healthier lifestyles will need to save more money for retirement, not less, than those with poor health habits because they are likely to live longer and incur expenses for chronic diseases and/or long-term care in advanced old age. Many people underestimate how long they can live and are at risk of outliving their assets.

In summary, there is a lot that people can do individually to prepare for retirement. Even if you don't reach that elusive $1 million that so many media pundits refer to, every small step will make a positive difference. It all begins with a desire to change and a solid action plan. Each of us individually can change the National Retirement Index as well as increase our own chance of having adequate resources in later life.


  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences