Are you confident about your retirement prospects, or does a review of your savings leave you feeling anxious? According to the Employee Benefit Research Institute’s 2016 Retirement Confidence Survey, only 21% of American workers are very confident about having enough money for a comfortable retirement. Meanwhile, a staggering 31% have said that neither they nor their spouses have saved for retirement. (1)
Hopefully, if you’re within five or ten years of retirement, you’ve been contributing to your nest egg for awhile. However, if you’re looking to save a bit more before you stop working to give you greater confidence, start by taking these five steps.
1. Boost Your Savings Rate
The most obvious thing you can do is save more. Even if you can’t imagine saving any more than you already are, try to find ways to put a few more dollars aside. Start by cutting back on expenses, channeling any raises and bonuses directly to savings, and automating savings increases of 1% every few months.
Your increased savings can be invested into your company 401(k) or 403(b) plan or your personal IRA. If you are over 50, you (and your spouse, even if only you work) can invest an extra $1,000 a year into an IRA for a total of $6,500 for 2018. The catch-up contribution for those over 50 is even greater for 401(k) and 403(b) plans at $6,000, for a total contribution limit of $24,500 for 2018. If you have managed to max out your IRA and workplace retirement plan and still aren’t saving enough, you can open a taxable brokerage account for your additional savings.
2. Cut Down on Debt
The less debt you have when you enter retirement, the better. Reducing your consumer debt before retiring helps you lower your monthly expenses and enables your savings to grow and last longer. While this sounds obvious, some wealthy clients I work with haven’t made a point to eliminate debt before they retire, which leaves them with higher expenses than is desirable.
Review all current debts you face and compare interest rates and balances. This can help you decide which to pay off first. Once you’ve eliminated credit card and auto debt, see how you can aggressively pay off your mortgage. Not having a mortgage could reduce your monthly expenses by up to a third and make a significant impact on how slowly you deplete your savings.
3. Review Your Insurance Coverage
Insurance is one of those financial products that most people purchase and then forget about. But it would be worthwhile to review all of your insurance policies to ensure that you actually need the coverage you have. Your needs may have changed dramatically since you had a young family and there is no point in paying for something you do not need.
Also, you should consider having Long-Term Care insurance in place once you are over 60. Nothing drains a nest egg faster than living in a nursing home and paying out of pocket. Someone turning 65 today has almost a 70% chance of needing some type of long-term care services, (2) so it is important to consider how long-term care will affect your overall retirement plan.
4. Invest For Growth
Just because you plan on retiring in 10 years doesn’t mean you have a 10-year horizon for your investments. You’ll only need a small portion of your nest egg at first, and some of your money will stay invested another 30-40 years. Make sure you are investing with the proper perspective and don’t cheat yourself out of years of growth.
One thing to remember, though, is not to try to chase unreasonable returns as a way to make up for a lack of retirement savings. With the proper asset allocation, your portfolio can see healthy growth without questionable, high-risk investments.
5. Work Longer
There are several benefits to delaying retirement to work a few more years, or to work part-time during retirement. The biggest reason is that you have more time to earn an income and save. And every additional year that you work is one less year that you will be depending on savings and draining your nest egg.
Working longer will also allow you to delay claiming Social Security. While Social Security benefits can be claimed as early as age 62, the longer you wait to file the greater the benefit you will receive. If you file at age 62, you will only receive 75% of your earned benefit, but waiting until age 70 allows you to receive 132% of your earned benefit. This can make a substantial difference in your retirement income for the rest of your life.
If you’re considering retiring before your Social Security kicks in, you may want to think again. In that case, you would have to draw down your retirement assets for 100% of your monthly expenses. Waiting until your Social Security benefits begin allows you to let more of your retirement savings remain invested for the future.
How I Can Help
If you are looking to boost your retirement savings, you can see that you have many options. However, investing, tax laws, insurance, and Social Security rules can be complicated and confusing, so it is important to work with an experienced financial professional.
Call us today at 985-605-7185 or email us firstname.lastname@example.org to sit down for a complimentary consultation where I can get to know your personal situation and answer any questions you may have. No matter how old you are or how little you have saved, it’s never too late as long as you get started today.
With nearly two decades of experience in the financial services industry, Jeremy Smith serves as a dedicated and knowledgeable financial advisor and the founder of Harbor Wealth Management. He specializes in serving retirees, pre-retirees, small business owners, and widows, providing a comprehensive array of investment management and financial planning services. Jeremy aims to serve his clients as a financial guide who is here for their every need, helping families find lasting solutions so they can focus on what matters most to them. To learn more about Jeremy, visit www.myharborwm.com or connect with him on LinkedIn.
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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. You should discuss your specific situation with the appropriate professional.