Three Steps to a More Secure Retirement

Financial planners often hear the question: “Am I putting enough aside for retirement?” It isn’t surprising, especially as people reach “a certain age,” that they start wondering about this, especially since “not being a burden to my children in my old age” is close to the top of many prospective retirees’ worry lists.

Of course, each person is different: we all have different goals, different standards, and different resources. But here are three ideas to increase retirement savings that can help almost everyone toward success, no matter the variables of the individual situation.

  1. Set a goal to save 15 percent of income. Saving 15 percent of your pre-tax income for retirement is a broad recommendation, but one that could be very helpful to many people. It is reachable for many people and, while not so much that it should deeply impact your current lifestyle, it can really build up if pursued with focus over a number of years. This is also a helpful goal for those with a company 401(k) plan who may be thinking that just meeting their employer’s matching level is enough. That’s certainly a good practice, but that may not be enough to build a sufficient nest egg for retirement. For those making more than $120,000 per year, for example, the annual 401(k) contribution limit of $18,000 won’t make this goal. These individuals may wish to consider opening a Roth IRA in order boost their retirement savings on a tax-favored basis.
  2. Invest intelligently. This is where a trusted, qualified investment advisor can really be helpful to many. The mistake that many people make is in failing to adequately diversify their holdings to protect against as many risks as possible. Too often, investors focus on market risk–the day-to-day value of their investments–and forget about other, more long-term risks, such as inflation. Failing to take inflation into account sharply increases the likelihood that your retirement investments will not grow fast enough to keep pace with ongoing inflation; you could reach retirement with a pool of funds that has lagged the growth rate needed to maintain your future spending power. A qualified advisor can help you determine your risk profile and can provide assistance with helping you to deploy your assets strategically and intelligently.
  3. Do the math–ahead of time. If you have questions in your mind about whether your retirement savings will be adequate, perhaps you should also ask: “Have I ever calculated how much money I’m likely to need when I retire?” Especially for younger individuals, simply having a target number can be a tremendous motivator toward improved saving habits. Here again, a qualified advisor can provide you with proven benchmarks for retirement savings that take into account your age, income, intended retirement age, and other individual variables. There are also a number of online retirement income calculators (google “retirement income calculator”) that you can use to help you get started with a general idea.

These three, common-sense suggestions are certainly not complicated, but they can help you set a course for a more secure, well-funded retirement.

Leave a Reply

Your email address will not be published. Required fields are marked *