So why do Americans suck at retirement plans? The issue is that even though 401(k) plans intend to complement Social Security, the sums paid out by the government are meager. The average Social Security retirement payout is $1,470 per month or $17,640 per year.

According to the most recent figures on consumer expenditures, the average American spent roughly $3,900 per month last year on necessities like food, housing, utilities, transportation, and health care. The retirement funds, such as pensions, 401(k)s, and individual retirement accounts, will close the deficit.

But that’s not the case with 401(k) plans. According to at least one economist, the issues with the programs are the main ones, not Americans’ saving practices. Everyone secretly believes they are making mistakes because the system aims to make individuals feel horrible about themselves. However, if everyone is making mistakes, there must be a problem in the system.

Issues with the present system

401(k)s and other similarly structured retirement plans have become popular as American corporations stop providing pensions. But since so many people lack access to employer-based retirement plans, the biggest issue with using 401(k) plans to supplement Social Security benefits is that they are not available to everyone.

The biggest issue is a coverage issue. Nearly 40 million workers in the private sector do not have access to an employer-sponsored retirement plan.

Most persons without any 401(k) savings do not have access to a plan through their employer, frequently because they work part-time or do not have employment by the company for enough time to qualify.

401(k) plans have no intention to replace a pension, even if people are covered and participate in their retirement plans.

First, even with the modifications lawmakers have made to make it simpler for customers to get started, 401(k) plans can be challenging for employees to understand. According to data, 65% of businesses with more than 5,000 employees last year automatically enrolled employees in 401(k) plans at a low set deferral rate. These schemes frequently start with a 3% contribution rate for employees and progressively boost it to 6%.

Although these auto-enrolment services help consumers get started, it can be challenging to manage the predictions and assumptions they must make.

You need to estimate your lifetime earnings and make certain market return assumptions to figure out how much you should invest to retire comfortably.

Even a tiny change in those presumptions can have a significant impact. You can receive findings that say you need to be saving close to half of your income if you slightly adjust your assumptions to be more pessimistic or more conservative.

According to recent academic studies, millennials will need to save 40% of their income over the next 30 years if investments yield less than 3% if they wish to retire at 65 and have enough to live off even half of their final pay, for instance.

People give up on that kind of savings goal when it gets overwhelming to achieve.

In addition, 401(k) contributions are optional, and you can use your money for a thing before retirement, making these kinds of retirement savings accounts more “susceptible” to economic downturns than traditional pension benefits.

Ways to increase your savings

The good news for millennials is that it’s not too late to save for retirement. It can be to balance saving for retirement with paying growing monthly housing, health care, and living costs and working to pay off existing debt, but it is achievable.

Spend some time first prioritizing your financial objectives. Millennials need to be clear about what matters most in the long run. Kids? House? experiences in life? There might need to be trade-offs.

Making a detailed monthly budget and exercising caution with your credit can also be helpful. Teenagers should exercise extreme caution while substantially raising their standard of living. After you have ratcheted up, it is tougher to ratchet it down.

It is worthwhile to sign up for your employer’s retirement plan if you are qualified, even though they are not perfect. You must choose how to invest your money after your 401(k) account is started and payments are starting to come in; otherwise, your retirement funds would effectively behave like savings accounts.

Millennials need to be clear about what matters most in the long run.

Professional financial planner(CFP)

Do not forget to contribute enough to qualify for any matching funds your employer may be willing to provide. Depending on the type of program, some employers will match your 401(k) contributions up to a particular amount. For example, if you contribute 5% of your salary to your 401(k), your employer might also tag along. 4% is the average matching percentage for Vanguard 401(k) plans.

Finally, you might want to analyze putting off your Social Security claim while you continue to work.

If you apply for Social Security at age 70 instead of 62, your benefits will be 76% greater. which can replace a significant amount of additional savings.

If you can, avoid retiring and continue working as long as possible. Work part-time if you are unable to work full-time. Each little bit counts.

Retirement Plans: Why Americans Are Bad At Planning? is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

The impacts of how inflation affects a common man are as discussed below-

Damages the common man disproportionately

Common man with lower salaries typically spends a higher percentage of their total income on needs than those with higher incomes, leaving them with less safety net against the erosion of purchasing power brought on by inflation. It is what economists mean when they say that a higher marginal propensity to consume is with lower incomes.

Policymakers and players in the financial markets frequently concentrate on “core” inflation, which excludes food and energy costs because they are more volatile and hence less representative of the longer-term inflation trend. However, lower-income wage earners in industrialized economies and people in emerging economies spend a disproportionately high amount of their weekly or monthly household budgets on food and energy, which are difficult to substitute or forgo as prices rise. Additionally, the common man is less likely to hold assets like real estate, as it is a hedge against inflation.

Instead, recipients of Social Security benefits and other government transfer payments get cost-of-living adjustments based on an index of consumer prices for hourly wage earners and clerical workers, which protects them from inflation.

Effects of inflation on a common man? Prevents deflation:

To fulfill its goals for stable prices and maximum employment, the Federal Reserve aspires for inflation of 2% over the long term. Instead of aiming for constant prices, it aims for modest inflation since this helps the economy function, gives room for error if inflation is overestimated, and prevents deflation, which can be far more destabilizing than equivalent inflation.

Lenders can charge interest during times of inflation to counteract the likelihood of a devaluation. By enabling borrowers, primarily regular people, to make future repayments using inflated money, inflation also aids in the repayment of debt. In contrast, deflation increases the cost of debt repayment because borrowers’ income would presumably decrease along with prices. Deflation deviates from the usual, so it’s also more likely to inspire predictions of deflation, leading to further losses in spending and income and a widespread loan default that might spark a banking crisis.

Because wages are sticky to the downside, mild inflation rather than deflation is more common. Layoffs are the most likely option for businesses facing a decline in demand because workers typically oppose attempts to reduce their pay during an economic slump.

A wage freeze will result in a decrease in actual labor costs if inflation is positive. Since inflation can also spiral out of control if it is high enough, it loses some of its benefits as a defense against deflation if it exceeds the usual and anticipated rate. It will have an increasing impact on the life of the average person.

When high, inflation consumes itself affecting the common man

A small amount of inflation is a strong economy and is unlikely to raise inflation expectations. Even 2% inflation is virtually unnoticeable if it was 2% last year and is 2% this year. In that scenario, businesses, employees, and consumers would probably anticipate that inflation will stay at 2% in 2019.

However, expectations of future inflation will eventually rise in line with the inflation rate when it suddenly accelerates and remains high. A wage-price spiral for the average person is triggered as expectations rise and workers start demanding higher wage increases, which companies then pass on by boosting production prices.

How inflation affects the common man? Interest rates are raised:

Governments and central banks have a strong motive to control inflation, as the examples indicate. The strategy has been to use monetary policy to control inflation. Policymakers can increase the minimum interest rate when inflation threatens to surpass a central bank’s target (usually 2% in industrialized economies and 3% to 4% in emerging ones), which raises borrowing costs throughout the economy by limiting the availability of money.

As a result, inflation and interest rates frequently follow one another. Central banks can tame the economy’s animal spirits or risk appetite as well as the price pressures experienced by the average person by increasing interest rates when inflation increases.

Lowers the cost of debt service for the common man

While those with fixed-rate mortgages and other loans benefit from repaying these with inflated money, which lowers their debt service costs after adjusting for inflation, while new borrowers, who are typically members of the public, are likely to face higher interest rates when inflation rises.

Consider borrowing $1,000 at a 5% yearly interest rate. The annual decrease in your inflation-adjusted loan balance will outweigh your interest charges if annual inflation rises to 10% in the future. This does not apply to adjustable-rate mortgages, credit card debt, or home equity lines of credit, all of which normally permit lenders to raise interest rates in response to inflation and increases in the Federal Reserve’s benchmark rate.

Increases employment and growth in the short term

Short-term economic growth can be accelerated by rising inflation. High inflation makes saving less appealing since it gradually reduces the purchase value of money. Consumer spending and company investment may increase because of that possibility.

As a result, unemployment frequently initially drops as inflation increases. Higher inflation can, at least temporarily, increase demand while bringing down inflation-adjusted labor costs, resulting in job growth. But eventually, a hard recession that resets expectations will be required to pay the price for chronically high inflation, or else the economy will continue to perform poorly.

Possibly lead to painful recessions affecting the common man

The issue with the trade-off between inflation and unemployment is that if higher inflation is accepted for an extended period to protect jobs, inflation expectations may escalate to the point where they trigger a vicious cycle of price and pay increases.

The Federal Reserve will therefore be obliged to hike interest rates far higher and maintain them high for a longer time to restore its damaged credibility and persuade everyone once more that it would control inflation. In turn, this will result in skyrocketing and persistently high unemployment.

How Inflation Affects Common Man: 7 Common Effects To Know is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Medicare is a federal program run by the state, which aims to provide low-cost or even free health coverage to low-income beneficiaries. Qualified applicants can receive Medicare benefits depending on the level of their income and resources, and other options such as supplemental plans and Medicare Advantage plans are also available.

To find a suitable Medicare plan 2019 beneficiaries can just use an online tool that uses specific information about the person to find the right plans for him or her.

If you want to choose the Medicare coverage by yourself, you can do that too. Just make sure you account for the following factors so that you too can find the right plan.

Costs

The costs refer to the premiums you have to pay each month, along with the deductibles, co-pays, and co-insurance expenses you have to pay out of pocket when you receive healthcare services.

In Original Medicare, the premiums are very low. However, there’s no limit in how much you have to shell out for out-of-pocket expenses per year unless you get some sort of supplemental coverage that offers a limit.

In Medicare Advantage plans that include both Original Medicare and supplemental coverage, there’s a yearly limit. Once you reach this limit amount, you won’t have to pay anything else for the healthcare services you receive.

Coverage

The right kind of coverage is crucial, because you want to cover the services that you know you will need. On the other hand, you don’t want to increase your premiums paying for coverage you don’t need.

The Original Medicare coverage is pretty basic with its Part A (hospital insurance) and B Coverage (medical insurance). Many find the coverage inadequate, which is why they may spring for supplemental coverage.

You can also go for Medicare Advantage plans instead, which offers additional coverage benefits such as vision, hearing, and even dental services. You can pick and choose the kind of additional coverage you want included in these plans that aren’t part of Original Medicare coverage.

Compatibility with Your Current or Supplemental Plans

If you have another health insurance plan while you also have Medicare, you need to make sure how your other plan works with Medicare. If you have Original Medicare, you can supplement the coverage with Medigap policies. You can’t get a Medigap policy for a Medicare Advantage plan, as this type of plan already has supplemental coverage in addition to Original Medicare coverage.

Prescription Drug Coverage

This is the Medicare Part D coverage that many people obtain in addition to original Medicare Part A and Part B. It is also included in most Medicare Advantage plans, but if it isn’t included in yours you’re allowed to get a separate Part D coverage.

This is a crucial coverage to obtain when you’re a senior citizen or you have a chronic ailment. The cost of prescription drugs can be overwhelming without financial assistance from insurance.

Doctors and Hospitals Choice

In Original Medicare, you can go to any doctor as long as they accept Medicare. On the other hand, some Medicare Advantage plans require you to only seek healthcare services from their network of doctors and hospitals. However, other Medicare Advantage plans do allow for out-of-network coverage.

You should then check out how close these network doctors and hospitals are to your home. You should also try to gauge the quality of care you will get from these network doctors and hospitals.

Travel

What happens if you travel a lot? What if you require medical services when you’re out of your home state or out of the country? In general, Original Medicare doesn’t cover healthcare expenses outside the country. Even most Medicare Advantage plans have the same limitation. However, there are Medigap policies for foreign travel emergency care.

With all these factors considered, you may then find the most suitable Medicare coverage for yourself.

How to Find the Right Medicare Plan for You is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

More than a third of people surveyed about how they’re going to pay for retirement would rather wait in line at the Department of Motor Vehicles than research or review their retirement plan options.

That’s just one of the things that many of the more than 1,000 people surveyed by Voya Financial said they’d rather do because they dislike working on their retirement plan so much.

Retirement planning isn’t something that should be done just once and then forgotten. It should be reviewed each year to reflect major life changes that can affect a person’s or family’s finances.

The survey found that 53 percent of people didn’t review their retirement plan after experiencing such a major life change.

Procrastination is common

Planning for retirement takes time, but it’s something many people put off. While 37 percent of survey respondents said they’d rather wait in a DMV line that look at retirement plan options, the good news is that 57 percent said they would rather review their retirement plan.

Such tasks include retirement plan research, reviewing retirement assets and fund allocations, and reviewing their plan performance.

Here are some more statistics from the survey:

• 63% said they spent little or no time on the retirement plan process.
• In the past year, more than twice as many people reviewed or adjusted their phone, cable/internet service (43%) than they did their retirement plans (20%).
• Personal insurance was also a higher priority, with 36% saying they reviewed auto or home insurance.
• 26% admitted they’d procrastinate longer on making a retirement plan decision than they would on other activities. These include speaking in public (23%), studying for an important exam (17%), and researching a personal loan (17%).

Millennials were four times as likely (63%) to update their social media profiles than they were to review or make adjustments to a retirement plan (17%). Only 11 percent of them have a retirement plan, the survey found.

Impact of life events on retirement plans

Getting married, divorced, having a baby, and changing or losing a job are major events that impact life and can affect personal finance decisions. As mentioned above, 53 percent of respondents didn’t review their retirement plan after such an event.

Other figures also stood out. Even if a major life event didn’t impact their finances, 35 percent of respondents didn’t review their retirement plan after a major life event.

A smaller group of 7 percent didn’t have a retirement plan, while 4 percent hadn’t yet experienced an event that impacted their finances.

DMV Line Better Than Reviewing Retirement Plan for Many is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

The 20 percent mortgage down payment rule is all but dead. Still, many home buyers think they need that much or near it to qualify for a home loan.

The average down payment on a home with a mortgage was 11 percent in 2016, according to a report by the National Association of Realtors. For borrowers under age 35, the average down payment was just under 8 percent.

Coming up with any down payment — whether it’s $20,000 for a 10 percent down payment on a $200,000 loan, or less, — can be difficult.

Some home buyers may consider getting the money from a source where they may have a lot of money stashed away — their 401(k) retirement plan. Borrowing against the balance of an employer-sponsored retirement account is an option in 53 percent of 401(k) plans, according to the Employee Benefits Research Institute.

Up to half of an account balance or $50,000, whichever is smaller, can be borrowed in a 401(k) loan. A credit check isn’t needed for approval. Interest rates are usually low, about two points above the prime rate.

Borrowing from yourself for down payment

The loan must be repaid, with interest, in monthly or quarterly installments. The full loan must typically be repaid within five years, though it can be extended if used for a down payment on a primary residence. You’re essentially paying yourself in principal and interest, instead of a bank.

If a payment isn’t made within 90 days, the amount borrowed is considered a distribution from the retirement account and is taxed as income. If you’re under age 59-1/2, you’ll also pay a 10 percent early withdrawal penalty.

If you quit or lose your job before the loan is repaid, you must pay the outstanding balance within 60 days.

Down payment can lower compounding interest

In the long term, a 401(k) loan leaves you losing out on compounding interest on the money you’ve borrowed. Also, people with such loans have been found to decrease or stop contributing to their retirement account during the years they’re repaying it. All of this can hurt your retirement fund balance.

A 401(k) loan should probably be your last option for coming up with a down payment for a home. Even if your retirement plan allows it, there are other options such as grants and other financial assistance programs through various housing agencies that are better alternatives.

But if a 401(k) loan is something you think you can repay within a few years, and you don’t have better options, then it may be worth exploring.

Why You Don’t Want to Borrow From 401(k) for Home Down Payment is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

People are Living Longer

It is projected that in 2050, over 20% of the population will be 65 years or older. That’s up from 12% in 2000. With more people living longer, there comes more time to enjoy life and work if you choose to. 65 doesn’t automatically mean you have to give up your job.

In fact, 65 doesn’t mean a decline in health or physical capabilities, so if you want to work, you shouldn’t let age hold you back.

You should never retire just because of the stigma around age. In fact, adults are expected to live to at least 84 years once they make it to their 65th birthday. That’s almost an extra 20 years. Can you imagine being retired for 20 years?

No Retirement Security

It is well known that saving for retirement is important. However, many baby boomers, Gen X’ers, and Millennials still aren’t saving and investing. This leads to a lower amount in savings, and a lower amount of money that can be used once a person has retired.

You should never retire if you feel you can’t make ends meet. Even if you can afford your lifestyle, money is never guaranteed. Having a job, even if part-time, or a side hustle can offer you more flexibility, and money in your pocket.

Could Reduce Aging Illnesses

Did you know that it studies have shown that people who never retire actually have decreased health issues, slightly happier outlooks on life, and even increased mental health? If you want to keep yourself in optimal health, never retire, because you may be putting yourself at a disadvantage.

While retiring doesn’t automatically mean health issues, short or long term, it could still be fulfilling to work or volunteer your time. Plus, who doesn’t want to have slightly happier outlooks on life?

Boredom Isn’t an Option if You Never Retire

If you are working, even part-time, you won’t have the opportunity to get bored in your day to day life. A common complaint amongst retirement aged people is that after a while, there’s not much else to do, especially if you are low income. By working or volunteering, you aren’t giving yourself the option to feel boredom.

You don’t have to work a traditional 9 to 5 your entire life. And, you certainly don’t have to have a job that is physically demanding and exhausting. But just taking a few hours out of the week to work or volunteer can keep you from feeling bored, lonely, or even depressed.

Even if you do choose to retire, pick a hobby that gives you the opportunity to get out of the house multiple times a week, and gets you in front of people. By giving yourself this opportunity, you’ll keep yourself happier, and kick boredom to the curb.

Extra Money Doesn’t Hurt

Who doesn’t love extra money? Even if you earned and saved enough to retire at 65 (as stated above), doesn’t mean you can’t earn even more. It could be money you save in a trust fund or splurge on you and your spouse. The fact is, even if you have to or want to work, the extra money can come in handy.

Another great reason to keep earning money, even after a certain age, is to save for healthcare. Nursing homes, private caregivers, and the like are expensive. Even those who saved their entire lives can get into a situation where they can’t afford care. By working, you are giving yourself the opportunity to afford these options if that time ever happens to you.

You should never retire, because it’s not as important as many people think it is. But if you do choose to retire, at least keep your mind, and body, happy and active.

5 Reasons Why You Should Never Retire is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

They are called retirement calculators.

But if you have looked at a few, you might notice they are not all the same.

There are some reasons why you should be wary of relying only on retirement calculators to help you determine how much you need to save for retirement.

They Give a Quick Overview

Free retirement calculators will give you a fast estimate of how much you should save for retirement. They are based on estimates of the average retirement age of any person, life expectancy, inflation rates, investment return, portfolio size, and retirement expenses. The problem with a quick estimate is that it is likely inaccurate. You need to delve a little deeper and take more time if you want greater accuracy in your figures.

They Make Assumptions

Part of the reason retirement calculators are inaccurate is because they use assumptions to make their estimates. For example, no one knows how long they will live, but it would certainly be better to estimate on the high side than to estimate based on the average and run out of money before you die. Several years ago, Social Security increased the retirement age because people are living longer, and obviously a longer life span means you need to save more.

So, what can you use instead of inaccurate retirement calculators?

Retirement Software

Retirement planning software is a tool that can help you determine how to plan for your future retirement. Some retirement calculators use clever ploys by claiming you can figure out what need to know “in 10 minutes or less”, but don’t the last 30 years or so of your life warrant more consideration than just 10 minutes?

Retirement Coach

Another tool to help you plan for your retirement is a retirement counselor or coach. They can help you apply various scenarios to determine what life choices are the best for your unique situation. They can also help you to learn the principals of retirement planning, such as inflation, and how they can affect your savings. A coach can put things into perspective by helping you to estimate future retirement returns based on current data.

Saving for retirement is something we all need to do. But in order to know whether or not we are saving enough to secure our future, we must be able to estimate our future needs with as much accuracy as possible. Retirement calculators can help us with that task, but they may not always be accurate. This is why you should explore other options as well.

Are you wary of retirement calculators?

Why You Should be Wary of Free Retirement Calculators (and What to Use Instead) is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Finance, pensions, and savings are always a hot topic for people under 35. People are living longer and with the retirement age continuing to rise, the question is, how can young people adequately prepare for later-life?

There’s no doubt that we should be doing this, though, and financial planning isn’t something you leave until you’re in your 40s or 50s. 

It’s difficult to talk about money. A report by Fidelity found that although 92% of women want to learn about financial planning, 80% said they refrain from talking about money with family and friends. When you think about the student or credit card debt that a lot of us are in, it can be embarrassing to discuss this with friends – after all, we’re told that financial matters should be kept private.

So what should we do? Of course, my advice is always to warn against burying your head in the sand. If you’re worried about money or need help with financial planning, there are countless resources out there to help.

Younger people, especially millennials, have a reputation for being careless with money, but I don’t think that’s true. We’re savvy and when it comes to research, I like to think we’re pretty good at it. I know I’ve never taken a financial decision lightly and there are so many resources out there these days, which makes things much easier.

I think the key here is to take action now. Yes, that’s much easier said than done, but taking action means different things to different people.

For some, it means having funeral costs sorted out in order to beat further price rises down the line. For others, it means simply opening a high-interest savings account and storing away $100 every month. Investments are another option too, and although they require a little more research, they can really pay off. It all depends on your personal circumstances and what suits your current situation.

It’s true what they say – the sooner you save for retirement, the better. The ‘golden rule’ of saving around 10% of your annual salary is certainly a reasonable amount to strive for, and shouldn’t impact too much on your day-to-day living. If it does, reassess what you can afford and aim for that, with the overall goal of slowly bumping your savings up to the recommended percentage. It means you don’t need to play catch-up when you hit 40, where you’ll only end up needing to save a higher percentage to make up for it.   

Financial Planning — Not Just for People Over 50 is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Money is vital for a comfortable, happy retirement. If you’re nearing retirement age and own your own home, but have no idea how you’re going to fund your retirement, one option is to look into a reverse mortgage. This offers you reliable income tapped from the equity in your home. Money isn’t the full picture, though, and even a reverse mortgage can’t make up for decades spent failing to save for retirement. If you’re not sure whether you’re ready, here are five signs you need to wait.

You’re Depressed on Weekends

For many Americans, work offers a source of identity—or a break from a stressful home life. If yo find yourself depressed or with nothing to do on weekends, you’re not ready to quit working. Instead, focus on what would make your weekends better: more leisure? A happier marriage? Less structure? Then work on cultivating that before you finalize your retirement plans.

You Don’t Know How Much Money You Need

Average retirement savings among Baby Boomers over the age of 60 is just $50,000. If you don’t have enough saved, you’re certainly not alone. But if you don’t know how much money you need to retire, then how can you possibly know if you’re ready? Retirement requires careful financial planning, and if you haven’t dedicated any time to this activity, you’re not ready yet. Sure, it’s scary to think about how much money you need. It’s even scarier to run out. Spend some time on this issue now, so that you don’t have to spend your retirement in poverty or panic.

You Don’t Have a Plan

Times have changed. The ability to count on a comfortable retirement has gone, and many people continue to work well into retirement. It’s unsurprising, then, that so many people struggle with saving enough money. Twenty-nine of people over the age of 55 have no retirement savings and no pension plan. Lots of people struggle with saving up enough money. Many near-retirees spend their final working years socking away as much money as they can. There’s no shame in playing catch-up, nor in having to delay your retirement a bit. But if you don’t have a plan for saving enough, have no idea when you’ll have the money you need, or no clear goals for how you would like to spend your retirement, you are not ready.

You’re in Debt

The senior years used to be a time of relative financial comfort. Today, seniors carry 50% more debt than young people. If you’re in debt, you’re paying interest on money that’s not yours every month. That directly affects your ability to retire, and can sap your retirement savings. Financial advisors often debate whether paying off debt or saving is more important, but one thing is for sure: you should not retire if you have debts you cannot afford to pay down. Doing so means you start retirement in a hole, and that hole can get larger and larger as your income shrinks and your retirement savings dwindles. Find a way to get out of debt now, while you still have reliable income.

You Have Unfulfilled Work Dreams

Not every dream has to be paid; you can begin working on that novel in your spare time, or paint a gorgeous mural to beautify your community. If there’s something you want at work that you have not yet achieved, the time to go after it is now. Regret can last a lifetime. And while there are no guarantees in today’s cutthroat climate, you might be happier if you spend a few extra years trying to achieve that final career milestone.

Annie Doisy is a reverse mortgage expert who helps seniors enhance their lives by taking advantage of the equity in their homes. Annie writes for ReverseMortgages.com where her goal is to educate consumers on a wide range of topics around mortgages and other financial services.

5 Signs You’re Not Really Ready to Retire is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

I’ve never been in major debt in my life, mainly for one overriding reason: I don’t like the idea of owing anyone money.

I’m in favor of good debt — such as getting a mortgage to buy a home, or a student loan to attend college, up to a certain point — but owing a company or someone money has always left me with a nagging feeling. I’m even happy to pay an annual fee for my rewards credit card so my family can use the reward points for free hotel rooms during vacations — but only because we pay the monthly bill off on time and don’t pay interest.

Here’s an example of how crazy I am about avoiding debt, even though it was only $20 from a friend:

In August I went with my daughter to her middle school for orientation, which included buying gym clothes. I mistakingly thought a credit card would be allowed to buy the items, so I left my checkbook at home and didn’t bring cash.  When I found out that only cash or check were allowed, I borrowed $20 in cash from a friend who was there with their daughter so that I didn’t have to return to the school and buy the stuff later.

A few hours later, I made a point of going to an ATM to withdraw $20 and deliver it to my friend. It was an obligation I wanted to fulfill that day, partly because I wanted to thank them for the quick loan, and also so I wouldn’t forget to pay them later.

My point is that even with a small amount of debt between friends, debt can be a bad habit that can easily get worse before it gets better.

Saving for a nest egg of debt

I have a desk calendar from The Onion, the satirical news site, and a recent entry had this headline:

“Couple Has Nest Egg Of Debt To Make Sure They’ve Got Some Money To Owe Down The Road.”

Beneath it was a short, funny story about a couple always having debt that will “hopefully provide us with a nice chunk of debt we can dig into later on if we happen to run into any unexpected prosperity.”

If they stuck to their debt plan, “they would have enough outstanding payments stashed away to not only retire in debt but also to ensure that their children could inherit some of their debt as well.”

While it’s just silly satire, The Onion story makes a few points that really stand out for me:

Debt hinders prosperity

Saving a “nest egg” of debt for retirement sounds preposterous, but it’s what some people are essentially doing by allowing themselves to be in debt as they prepare for retirement.

Think about what you could do if you did’t have debt to deal with. Yes, you could easily spend it on more things — clothes, dinner out, a new car, travel — or you could allow yourself to be prosperous.

With debt, any unexpected prosperity that does come along — such as a bonus at work, tax refund or an unexpected new client — will put a cloud over the extra money that just came your way. Paying off debt with such a bonus is a smart move — but not having that debt when a bonus comes around could lead to a lot more prosperity down the road.

Don’t give debt to your kids

Debt can’t be inherited, so that isn’t something to be worried about. Your hospital bills at the end of your life don’t have to be paid for by your heirs.

But constantly trying to tackle debt and taking on more debt is a lesson you don’t want to teach your children.

It goes back to the idea of hindering your future prosperity by always having debt. It can be a constant struggle to get ahead in life and have the money you need to improve your life if you’re always taking on more debt.

I bought three websites this year to help me earn some passive income, and I vowed not to buy more websites until the ones I have are profitable. I’ve had an opportunity recently to buy another site that should lead to some decent passive income, but I’ve followed by own advice and decided not to buy until I’m out of the hole with the other sites, including this one.

It’s debt I could probably afford, but I want to continue paying myself back for the outlay for the other websites until they’ve paid for themselves.

No one seriously grows their debt so that they’ll be in debt during retirement, but that’s essentially what people are doing by taking on more debt and barely paying off their debt when they’re young and working.

If that doesn’t put a sinking feeling in your gut, as it does mine, try imagining your retirement every time you pull out your credit card.

How Debt Sets You Up for Failure is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.