For golden years or a crisis, be sure to have a plan

Chad Waddoups, vice president of Investment & Insurance Services at Mountain America Credit Union, says Americans should be more prepared to deal with a personal financial crisis.

How are we doing financially?

Recent studies from Ameriprise indicate that less than 70 percent of Americans are actively preparing for retirement, let alone any type of financial crisis. An MIT study showed that nearly half of all Americans who pass away do so with less than $10,000 in assets. In addition, The Department of Labor estimates that only half of Americans have even calculated how much is needed for retirement or taken steps to prepare. These are frightening numbers and should concern everyone, regardless of age.

What should we be doing?

Preparing for retirement need not be overly complex. It is really a matter of planning. Plan to save and stick to the plan, even if you can't save much to start. Plan to cut out some spending so you can meet your savings goals. Plan how much you may need in retirement. This involves determining how you want to live and thinking about some activities and adventures you plan to take on in retirement. Plan to always contribute to your employer's retirement plan, especially if a match is offered. Plan to NOT touch these savings until retirement. And plan to meet with an expert who can guide you through this important process and make sure you are able to stay on track to meet your goals.

Explain smart debt.

It's debt that makes sense given the current interest rate environment. For example, if you are paying 5 percent on your mortgage (which is still a good rate, historically), you can save a significant amount by refinancing at today's low rates. The average rate on a new 30-year mortgage is near 3.4 percent and the 15-year mortgage is even lower, near 2.7 percent. Local rates can be even lower. The same philosophy applies to any loan a consumer may have. Loans on credit cards, autos and RVs should all be reviewed to determine if some interest could be saved by refinancing, which is a quick, simple way to either save money on interest payments, pay off your debts sooner, or both. Smart debt also means using debt only when there is value to be gained by using it, say, for a home or an automobile, not for a television.

What kind of savings should we have?

We should be able to account for emergency short-term and long-term needs. A reasonable amount to save is three to six months of your salary. This should be in conservative savings vehicles such as cash, CDs or money markets. Funds to cover short-term needs (between emergency funds and retirement) should also be invested conservatively but, given the extended time frame, can take on a little more risk. This money is geared toward covering living expenses once emergency funds are depleted and should be focused on investments that offer income, stability and inflation protection, as well as modest capital appreciation. Giving heavy consideration to long-term needs is critical to any successful retirement plan. With long-term funds, most are willing to take on more risk, allowing for greater returns. A common rule of thumb for determining how much should be saved for retirement is 10 tomes to 20 times your annual salary.

Dawn House Chad Waddoups, executive