The polls are clear and dismaying. Just 13% of Americans are "very confident" in their retirement planning, while 38% are "somewhat confident," the Employee Benefit Research Institute found in a 2013 poll.
That means nearly half of us (49%) are somewhere on the other side of that line. Shockingly, nearly a third of Americans (28%) are "not at all confident" in their retirement plan. That's a record high for the 23 years of EBRI polling.
The nervousness of Americans regarding retirement has unleashed a flood of government proposals. One is a new type of IRA, called the "myRA," which offers automatic pay deduction features, has no fees and invests solely in U.S. bonds. It's meant to be a starter account for the half of Americans who cannot access a 401(k).
Several states are getting in on the act, proposing a variety of ways to help uncovered workers. The idea is to create privately run retirement plans through nonprofits, employer associations and other groups, who then would become fiduciaries, that is, they look out for savers in the plans.
While these simplified, low-risk savings plans are welcome, any person earning a wage already can open a Roth IRA and buy a commission-free total bond ETF with an extremely low management fee.
The future income from such an investment would be tax-free and, while an all-bond portfolio is not the best advice, it would approximate the myRA approach without the government having to lift a finger.
The problem is, you have to actually take steps: The person has to open a Roth account somewhere, have the discipline to set aside a portion of each paycheck and then remember to fund the IRA by their tax deadline. Clearly, that's beyond at least 49% of us.
Roll your own plan
If you're in this situation, you could wait for the government to step in and create a product. Or, you could get a jump-start today. It would take about a week to get everything off the ground.
Once you build your own retirement plan, however, the actual work of managing falls to a couple of days a year.
Here are the steps:
1. Go online and select an investment service. Fidelity, Schwab, Vanguard and TD Ameritrade are just four of the largest. Most require a minimum to start an account, which varies from zero to $1,000 or more. The money resides in a "sweep" account at the brokerage, a basic cash account.
2. Open an individual retirement account (IRA) for every wage earner in your family. Consider opening both traditional and Roth accounts. One gives you a tax break now. The other gives you a tax break later.
3. Get the account number of the sweep account and ask your employer to automatically fund it through your payroll department, taking a fixed amount from each paycheck. If they cannot, set up an automatic deduction at your bank for the day your paycheck clears.
Then forget it, until tax time. Your preparer can advise you on which IRA to fund to receive the maximum benefit. If you are unsure of how to invest, a well-designed portfolio is easy to create and track online.