THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, August 7, 1995 TAG: 9508040032
SECTION: FRONT PAGE: A6 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 57 lines
The Labor Department is worried that the retirement prospects for the huge baby boomer cohort could be grim. Boomers are now between the ages of 30 and 50, and there are 60 million of them. They aren't saving enough for retirement and won't be able to rely on Social Security or traditional pension plans to bail them out.
Savings ran at 5.5 percent of gross domestic product in the 1970s. The rate has now slipped below 3.5 percent. A third of all boomers eligible to take part in 401(k) or similar retirement plans don't take part. Social Security was never intended to fully fund retirement and there is likely to be less of it when the boomers reach retirement age. Traditional pension plans are being replaced by self-directed investment options.
That means the onus for investing early, enough and wisely is squarely on the shoulders of individuals, many of whom are befuddled by personal finance. The Labor Department is setting out to educate workers about the need for retirement planning. A number of free government publications will be available. But ultimately, it's the responsibility of each citizen to educate him or herself. Help is available. And some rules are obvious.
Start early. Given time to work its magic, compounding can turn chicken feed into a large nest egg, but it takes decades.
Tax-deferred investing beats the alternative. Most people saving for retirement should make maximum use of IRAs and 401(k) plans.
Asset allocation matters. Stocks have traditionally outperformed bonds and money market instruments over the long haul. For inflation-beating returns, long-term investors shouldn't be too conservative.
Slow and steady wins the race. A regular program of investment beats a sporadic on-again off-again style.
Diversify. Putting all one's eggs in one basket is a great plan for Easter decorating, but not for achieving a secure retirement.
Let the investor beware. Investing is full of fast talkers with something to sell. It's your money at stake and you've got to make your own decisions. Objective information is preferable to the advice of salesmen with a vested interest in what you buy.
Information is available at your local library, including books, magazines and newsletters devoted to investor education. The library also subscribes to services that can help you evaluate stocks and mutual funds. There are college courses that teach investment fundamentals. Investor clubs let investors pool their knowledge as the saga of the Beardstown ladies shows.
The warning of the Labor Department is well worth heeding. If boomers wait until they are nearing 65 to worry about retirement, their final decades won't be golden. But if they start investing now, there is still time to assure their own security and - incidentally - increase the prosperity of their country. by CNB