Personal finance tips for retirement

Unfortunately what should have been a purely financial decision for most Americans has become a political decision. Planning for retirement and investing money are very individual decisions since each person's financial situation, goals, appetite for risk, and lifestyle are unique. But the Social Security privatization debate is evolving largely along political lines and may be that is exactly how President Bush wanted it.

If you support the president, you should support his privatization plan, seems to be the argument presented by those who support creation of personal investment accounts. But as more details about these accounts have been leaked, even those Americans who side with the president on almost everything else are revolting because the privatization is going to hurt them, where it hurts most - in their wallets. (Related article: Support slips for personal investment accounts after risks and costs become clear to Americans)

Our analysis shows that no matter what your political affiliation, how young you are, and how much you love the president, it does not make sense for Americans to select private investment accounts. As Gallup Organization writes in its analysis, "...the privatization issue is rapidly becoming more partisan. The concept is now being actively promoted by a Republican president, and widely criticized by his Democratic congressional opposition. This suggests that public opinion on Social Security could devolve into nothing more than a referendum on the president." (Related article: Americans are advised to avoid personal retirement accounts in the interest of personal finance and retirement planning)

Republicans are citing polls that suggest that there is widespread support for privatization. Indeed that has been the case for years since saving for retirement is a virtue that we all believe in. But when risks and costs of privatization are pointed out, the support for President Bush's plan drops immediately. According to Gallup, "Questions that focus on the financial risks to individual investors -- those stating that the plan would reduce guaranteed benefits to retirees without mentioning that this would be compensated for by private investment-account earnings -- find larger majorities opposed. " (Related article: Americans ill-prepared for retirement)

So what can you do with regards to planning for your retirement?

"Reliance on government for our financial well-being is one of the dangers I've been talking about for years," says Robert Kiyosaki, author of 'Rich Dad Poor Dad' and founder of The Rich Dad Company. "And before we can expect the average American to manage his or her money for retirement, we must teach the basics of financial literacy. In our country today, schools don't even teach students how to balance a checkbook. How can we realistically expect the average American to invest wisely for the future?" he asks. (Related article: Not all Americans ready yet for the stock market)

So it is very important to understand that Americans lose either way. If Social Security is privatized and you opt for a private investment account, then the retirement income is likely to drop significantly and there is a high risk that you will fall into poverty at a very vulnerable time in your life. If it is not privatized and nothing else is done (which is unlikely since even if Bush fails in his efforts, subsequent presidents will make necessary changes in coming years), then many Americans may not have a stable source of income from Social Security. So the best option right now and the most selfish one is that no matter what happens, you should not select the personal investment option. (Related article: Retirement planning for those who hate to plan)

What else can you do? Prepare smartly for your retirement. Robert Kiyosaki has some excellent personal finance tips that you should read to get started.

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