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If only we had the gift of being able to see into our financial futures. But alas, short of clairvoyance, we have but one skill at our disposal to affect the years ahead - and that's careful planning.

Whether you're saving to purchase your first home, put your kids through or college or retire comfortably when the time comes, there are three essential steps common to each endeavor. 

These include identifying goals, establishing an overall financial strategy and committing ourselves to the financial tactics that lead to meeting our targets. 

As this can get complicated, we welcome the expert advice from Susan Doktor and Money.com in this thought-provoking guest post.

Planning Takes Time and Discipline

None of these tasks is simple. Nor can you accomplish them overnight.

Ideally, financial planning is something we begin when we're young and have decades of earning ahead of us. And yet, the average age at which workers begin saving for retirement is 31 years old. 

According to a 2018 report published by the Federal Reserve Bank, only an alarming 40% of Americans have enough savings to manage a $400 financial emergency.

And the economic downturn precipitated by the global pandemic forced many Americans to dip into what savings they had amassed just to pay their daily expenses.

The Encouraging News

To say that COVID changed everything is no understatement. We worried about our health. We were separated from our friends, families and many of the institutions that define our communities.

Countless businesses closed and unemployment rates remained at record highs for months. Low-income families were hit the hardest, but all of us felt the deep repercussions of the crisis. And then something strange happened.

All that uncertainty appears to have had a profound effect on Americans' attitude towards savings. US workers accrued a whopping $3.7 trillion in savings during the pandemic. 

We'd be remiss if we didn't note that 70% of that money went into the bank accounts of just 20% of the nation's workers - America's highest earners.

But the importance of savings, underscored by the COVID economic crisis, saw workers across the board changing their financial habits.

Getting Smarter Younger

There are generational forces at work behind those changes, too. 

Perhaps due to the ubiquity of employer-sponsored retirement plans, Gen Z workers (born between 1997 and 2012) are saving for the future at a much higher rate than their older counterparts.

The median age that they've begun saving for retirement is a truly impressive 19. Compare them to Baby Boomers, who didn't start thinking about retirement until the median age of 35.

One might also point to the wider availability of financial counseling and democratization of investing. 

Between the breadth of financial media available online and the rise of digital investments companies that support smaller investors, younger people have become more financially savvy and are taking greater control of their futures.

The Evolution of Retirement Savings

Once upon a time, there were pensions.

Back in the day, it was common for employees to pursue one-company careers, with the promise of being well taken care of in their retirement years by the employer-funded pensions they earned. But pensions were expensive for corporations. 

All of the risks of investing in pension funds fell on employers. Then, in 1974, the Federal government authorized the first Individual Retirement Accounts (IRAs) under the Employee Retirement Income Security Act .

In 1978, Congress amended the federal tax codes, and changed how workers save for retirement forever, paving the way for tax-free savings through employer-sponsored 401K plans.

Under this new scheme, the burden of funding retirement fell on the workers, who in turn bore the risks of their own investments.

Stock market volatility and crashes hit workers directly. The move away from pension benefits has been widely criticized for that reason.

But 401Ks also gave workers an extra measure of freedom. Their retirement savings were portable. They could change employers at will, without concern of losing a portion of their retirement nest eggs.

They could borrow against their retirement savings, when necessary, albeit with tax penalties. And they could invest outside the group fund selected by their 401K managers and invest according to their own values, research and hunches.

And most 401Ks came with the benefit of employee matching programs - direct cash in the pockets of the workers.

Life Insurance as a Retirement Savings Vehicle

Often overlooked, particularly by younger workers, life insurance can be an effective part of an overall savings and retirement strategy. 

Purchasing an insurance policy is one of the most common recommendations financial advisors make, particularly as a means of balancing an investment portfolio.

Generally speaking, it doesn't offer as large a potential return as other investment vehicles. 

In fact, it's a very conservative investment that doesn't expose policy holders to the same risks as investing in the stock market, cryptocurrencies or precious metals, for example.

Most people don't even consider purchasing a policy until they're in their 30s and, even then, opt for the protection of a term insurance policy. But it's not a savings tool. It only provides a death benefit and doesn't build cash value.

 Only some form of whole life insurance can do that for you. When you pay these premiums, part of your payment goes to your insurer and funds the death benefit portion of your policy. 

The remainder accumulates as cash value, which can be compared to funds accumulated in a savings account. If you need to access the cash value of your policy while you are living, you can make a straight withdrawal or borrow against your policy.

Policy withdrawals and loans are tax-free income, provided you continue to pay your premiums until you die and your death benefit is paid.

Financial experts recommend whole life insurance as a retirement savings tool because the policy withdrawals you make can be used to fund your retirement.

You're Ahead of the Game

If you're reading this article, believe it or not, you're better prepared than most people to have a secure financial future. Only 4 out of 7 Americans are considered financially literate - and you're taking steps to become one.

If you've consulted a financial advisor and have laid out a long-term financial plan, better still. 

If you've invested in a 401K, invested steadily in the stock market or have a life insurance policy in place, you're outpacing millions of Americans with your forethought and action.

Only 30% of Americans have taken the time to craft a long-term financial plan and 42% have less than $10,000 in retirement savings.

But, no matter how far along you are in planning for a comfortable, safe retirement, it's important to view financial planning as a dynamic process. 

Our personal circumstances change. The stock market rises and falls. Pandemics grip the globe. So, the best approach to financial planning balances long-term strategy and commitment to periodic re-evaluation. 

Closing Thoughts

The state of retirement planning has changed over the years. Now, the onus is on the individual to plan and save for their retirement. This is new ground for many people and financial literacy becomes crucial.

RetiresGreat.com is committed to helping their readers navigate every aspect of retirement, from the emotional to the interpersonal to the financial challenges you may face. 

Check back with us frequently, follow us on social media and subscribe to our newsletter for tips you can use to make your retirement as secure and joyful as it has the potential to be. 

Author Bio:

Susan Doktor is a journalist, business strategist and principal at Branddoktor. She writes on a wide range of topics including personal finance, government affairs and family issues. 

Her content comes to us courtesy of Money.com. You can follow Susan on Twitter @branddoktor.

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