This will come as no surprise to regular readers of this blog but each and everyone of us will one day find ourselves taking our first steps into retirement. When that day comes, your financial support will have to come from other sources, rather than from your business or your job.

Unfortunately, a growing number of Americans today are losing their grip on the personal retirement tactics they once understood and embraced over the last few decades.

Baby boomers remember the days of plenty, when investing in things like simple banking products, including savings accounts and CDs, produced substantial returns, rewarding all account holders with interest rates as high as 12%!

But decades of questionable policymaking and endless budgetary waste have forced retirees to reevaluate their personal retirement plan and reluctantly accept deep budgetary cuts supposedly aimed at rescuing a federal government perpetually mired in a vicious cycle of borrow and spend.

That’s the biggest reasons why I encourage everyone to develop a better awareness and understanding of the economic realities we are all living in today. To that end, I want to focus on the tools you have in your retirement toolkit, especially IRAs and 401(K) accounts, to help you better navigate today’s retirement process.

How Well Equiped is your Retirement Tool Belt? 

Today, most people think of their IRA and/or 401(K) account as retirement tools — but they are not.

Let me say it again: They are not.

They’re simply a means of saving for your retirement years, and as such, are subject to the rules and regulations of the tax code, the whims of government monetary policy, and by the ever changing mood and temperament of Wall Street.

Ask yourself a question: How good is a plan where the individual puts up all of the money and shoulders 100% of the risk, but after 30 years has, in many cases, unknowingly forfeited nearly half of the proceeds to the institution holding the money?

Sounds like a much better deal for the broker than it does for the individual.

And that’s not just my opinion — its a viewpoint shared by many respected experts, including billionaire and investor extraordinaire Warren Buffet.

On the other hand, the average bank CD has, at least for most of the last decade or so, paid depositors rates so low it guaranteed little more than the loss of your spending power by falling behind inflation every year. Again, it appears to be a much better deal for the bank than it does for the consumer.

So, here’s another question: Do you believe either of these popular financial instruments are really the best tools to have strapped to your utility belt as you make your way along the path towards retirement?

We can debate whether or not financial institutions have the best interests of retirees at heart, but the game is not lost here. As a retiree or active worker, there’s still a lot you can do.

After all, there are financial products designed specifically for retirees that provide a number of features and options these other tools do not. That’s not to say 401(K) and CDs aren’t valuable financial instruments, perhaps just not the best tool to meet the demands of today’s retiree.

Strive Always to be the Hammer — Never the Nail

We understand the importance of having the ‘right tool for the job’, and most of us are familiar with the maxim, ‘a carpenter is only as good as his tools.’ This wisdom is particularly appropriate regarding the selection of financial tools — the tools you select for retirement are every bit as important as the tools required to work on and complete a construction project.

Given the wide variety of retirement tools available, it’s important you choose the right quality and type of tools to meet your individual needs.

It’s also important to consult and consider working with a retirement professional — enlist the help of a specialist who clearly understands the complexities of todays economy and can be valuable in helping you determine a proper overall retirement strategy that’s right for you.

A specialist can also help you to better understand and utilize financial tools — for instance, would you ever try using a pipe wrench to drive a nail? Of course not, you’d select a hammer instead, an implement designed specifically for the task. It’s sometimes the less obvious misuse of tools that give us the most trouble, like trying to use a screwdriver instead of a pry bar or a shovel in place of a trowel.

While some choose to ‘make do’ with whatever they have at the time, the truth is owning a tool purposely designed for a specific job, especially if it’s a job you perform repeatedly, is truly a wise investment.

It’s a poor Carpenter who blames his Hammer

Having the right implements in your retirement toolkit is of paramount importance — after all, it’s your life we’re talking about. Take care of yourself; watch your diet and get some daily exercise, and with a little luck you could be looking at another 30 years or more after retirement!

So, why run the risk of being without something you need when you can easily acquire tools specific to your individual retirement needs? Why settle for a plan that could potentially leave you short of your personal, financial, and retirement goals?

Become more of a discerning craftsman today — discard tools of questionable value, sharpen and hone your understanding of what the marketplace has to offer, and then consider adding a specific tool should you determine the need exists.

Takeaway

One of the big challenges facing Baby Boomers is to avoid making decisions they might one day regret.

Today, the average workshop features a vary of tools, each one exquisitely designed to perform a particular task — take any one of those away and even the most skilled builder will see his or her productivity fall dramatically.

To put it another way, tools really do make a difference. Poorly designed tools tend to slow us down and a tool of poor quality, especially financial tools, can even end up hurting us. That said, tools alone won’t turn an amateur into a skilled craftsman, but there’s no question the use of proper tools makes everyone much more efficient, effective, and productive.

So, what’s in your retirement toolbox?