The US is facing a retirement crisis with no end in sight. The issues are many, with reports pointing to several contributing factors, including the Social Security shortfall and employees’ lack of access to company-sponsored retirement plans. Some experts believe the biggest issue is a simple failure to plan for retirement.
“The US is facing a retirement crisis because most people either don’t understand that retirement will come one day or don’t believe it applies to them,” says Jeffrey Goodrich, professor with UCLA’s Financial Management Program and wealth advisor at JCG Private Wealth Management. “When a worker starts their career, retirement seems distant. And because it feels far off, they don’t focus on it or save for it.”
In addition to his roles as an advisor and a professor, Goodrich is also the author of the books “Surviving the Retirement Crisis” and “Seeking Financial Freedom,” which share his expertise in retirement planning, wealth management, and financial independence with readers. His writing, teaching, and advising provide practical insight on navigating today’s retirement landscape, building long-term financial security, and achieving financial freedom.
Proper retirement planning requires understanding how age can impact retirement savings
Starting early on retirement investing solves many of the problems that make the process challenging. By allowing more time for accumulating savings, workers can reduce the monthly amount they need to invest and increase the impact of compounding interest. A longer accumulation phase also reduces the impact of market volatility, giving savers more time to recover from market downturns.
But starting early isn’t the norm. Workers push off their retirement savings for various reasons, then lose sight of its importance as the years pass by.
“Retirement creeps into the picture when workers aren’t looking,” Goodrich says. “And as they get older, they can start to believe they can work forever, which makes retirement income seem irrelevant. The reality, however, is that starting when you’re young gives you more compounding periods, which allows your money to grow more efficiently.”
Goodrich warns workers that a number of age-related changes can arise and cut short their earning potential. Workplace developments can also have an impact. Effective retirement planning anticipates such changes and provides a reliable retirement income to help workers weather them.
“Health issues can interrupt the work plans many people have made,” Goodrich points out. “Things like hearing or vision loss, reduced energy, and chronic health conditions can all take a toll on a worker’s quality of life, often contributing to declines in everyday functioning. Even when health isn’t an issue, the advent of work-related changes, such as artificial intelligence in our era, can cause jobs to cease to exist down the road.”
There is no ‘one-size-fits-all’ savings plan for retirement
Once workers make a commitment to retirement investing, developing a personalized plan is important. Retirement goals can vary widely from person to person, and reaching those goals may require a unique combination of investing tools.
“Each client has their own timeline, risk tolerance, cash flow, and liquidity needs,” Goodrich says. “There’s no one-size-fits-all investment strategy that will help them get there.”
Goodrich encourages an approach that begins with assessing risk tolerance and reviewing the basics of diversification, rebalancing, and the investment timeline. Once he explains and establishes those elements, he offers several disciplines, including financial planning, tax planning, and retirement planning, that help translate investment strategies into success.
As those disciplines are applied, a blueprint for building tax-smart income begins to emerge. And as investors commit to sticking with the blueprint, they gain the capacity to build wealth that lasts through market volatility.
“To help my clients build their financial legacy, I created a Family Mission Statement that guides individuals and their families in finding their life’s mission,” Goodrich says. “I also understand that a long-term focus lets my clients take advantage of ‘time diversification,’ spreading the risk of owning investable assets across volatile market cycles and significantly reducing risk over time.”
Effectively preparing for retirement requires understanding the dynamics of risk and reward
The fear of loss is another factor that can keep people from starting and maintaining retirement investments. To help people in this area, Goodrich brings an understanding of how risk and reward are inextricably entwined.
“People worry about losing hard-earned money,” Goodrich says. “During market downturns, that worry can trigger an instinct to freeze or hide. In addition, past mistakes or a lack of savings can create a guilt feedback loop that causes people to avoid their accounts entirely. What they need to understand is that all investments involve some degree of risk and that a portfolio without risk may not earn enough to meet a client’s goals or outpace inflation.”
Drawing upon the elements of modern portfolio theory, Goodrich encourages people to leverage diversification that comes from the interaction of different asset classes. With proper asset allocation, he says, retirement savers can maximize returns for a given level of risk, provided they are willing to commit to the long-term application of a sound strategic blueprint.
“In my book, ‘Surviving the Retirement Crisis,’ I argue that retirement is a long game,” Goodrich says. “Most people misunderstand and believe they need a large sum of money to retire, when what they actually need is to accumulate enough money to retire while maintaining the standard of living they have become accustomed to. Obstacles may arise, but proper long-term planning allows savers to accumulate what they need despite the obstacles.”
