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131_homespun_web.jpgBy Dan Serra

RISMEDIA, January 31, 2009-(MCT)-The turmoil in the economy today is enough to make us want to avoid putting money away for retirement for fear of needing it now. That’s natural. Most Americans feel they need to have all of their money available now.

We often are scared of locking up our money, or we have the attitude that putting away even a little won’t be enough to build a decent retirement-so why bother? But those who do let go now and invest for the future understand that a little can go a long way, thanks to the power of compounding. For example, saving $100 a month for 10 years at 4% interest will build to almost $15,000.

For longer time frames, more monthly savings and higher returns, that not only can build up a retirement fund, but may create a longer and happier life. Research in the Journal of Financial Service Professionals found evidence that financial strain in retirees is accompanied by depression and negative feelings, while financial security exudes improved health and contentment.

Some of the reasons people lack a sense of urgency about building a retirement fund include:

– Underestimating how much it costs to live in retirement. Many will actually see expenses increase once more travel and recreation are factored in during retirement.
– Not realizing how long they can live. Life expectancies have made retirement periods grow from just a handful of years in 1940 to 25 years or more today.
– Overestimating what they will receive in Social Security and other benefits. Request your Social Security earnings statement at to see what your monthly income will be as of now. The maximum monthly check is $2,323.
– Falsely believing that Medicare will cover all their medical bills. Medicare comes with monthly premiums, deductibles up to almost $1,000 and limited days of benefits per treatment.
– Underestimating the cost of assisted living or long-term care. These expenses average about $3,000 a month, according to insurer MetLife. The government will pay this expense only when you’ve run out of money.

It is easy to dream of retirement bliss. However, we must prepare for but psychologically as well as financially. A good rule of thumb is to save at least 10 percent of your income in a retirement fund. If you’re young, it also helps to invest in times like these when stocks are down.

Heading off short-sighted financial habits today will make retirement a more enjoyable experience.

Dan Serra is a financial planner with Strategic Financial Planning Inc. in Plano, Texas. E-mail him at

© 2009, McClatchy-Tribune Information Services.