Retirement planning can be confusing and it can be difficult to know where to start.
When it comes to retirement planning the greatest challenge often is the wiring in our brains. Our brains are not wired to think long-term and retirements are longer now typically lasting several decades. To help you understand how our fuzzy brains get in the way of making smart financial decisions let’s start with a quick cup of coffee. Would you buy a cup of Java now for $2.00 OR a year from now receive $4.00. Which would you choose? The way our brains are wired makes our well-being in the future seem less important compared to today but getting $4 next year instead of a $2 cup of coffee today is a pretty good deal. Your job right now is to see that as clearly as you can and do your best to see your future needs are met.
Let’s look at another example of how our brains are not long-term wired. What if prices rise 3% next year, a $10 pizza will cost $0.30 more. Most would call the difference small and might not even notice but if prices continue to rise 3% a year in 20 years $10 could buy barely half a pizza. The point is smaller numbers can really get bigger over the course of a long retirement so when planning for retirement don't think in terms of dollars but always what those dollars can buy.
The way we are wired also distorts how we see ourselves. Take driving. Most people have been driving for decades with very few accidents or tickets. So compared to those other folks on the road, what kind of driver are you? One survey states that most people, 94%, think that they're above average drivers. That's a pretty rosy picture and optimism is a terrific trait but not if it puts us in danger. The reality is that only 49% of drivers can be above average. The rest are not, even though nearly all think they are.
When we are younger our optimism hopes for continued good health but as people increase in age they also increasingly get sick and health care costs historically increase too. In addition, financial ups and downs are also likely over the course of a long retirement but too many of us hope we won't get hit. Life is best if we stay optimistic but it makes sense to snap on a seatbelt and take reasonable precautions. Have a plan for what you'll do when good things go bad. Retirement planning takes time and a step at a time. And finally don’t get overwhelmed and when it's time to take the next step don't procrastinate.
Now you can take your financial future to the next level with an IRA from Church Extension Fund. When you entrust your retirement savings to CEF you’ll help finance the growth of Michigan churches, schools and ministries, while growing your own investment with an attractive rate of return. CEF can also help you transfer an existing IRA or roll over your 401(k) to a CEF IRA. Before you know it you'll have your plan and then you can put your feet up and enjoy your retirement.