Retirement: a time to relax, travel, and finally reap the rewards of your hard work. But for many Americans, this dream turns into a nightmare due to a lack of financial preparedness. With an aging population and rising healthcare costs, millions are facing a retirement shortfall.
This begs the question: Are you on track for a secure retirement?
Let’s delve deeper into some of the challenges facing retirees today:
Longevity Risk
People are living longer than ever before. This means your retirement savings need to last longer too. Social Security, while helpful, may not be enough to cover your expenses for several decades.
Social Security provides a helpful boost, but it likely won’t cover your whole retirement budget. Living costs rise faster than benefit increases, and it may not match your desired lifestyle. To help ensure a secure retirement, consider additional income sources like savings or part-time work.
Underestimating Costs: Many people underestimate how much money they need in retirement. According to a Yahoo Finance Article, the average American retires at 66 with a net worth of only $170,516. This is simply not enough to support a comfortable retirement for most people. (1)
Early Withdrawals
Many people are forced to tap into their retirement savings early, due to unexpected expenses or job loss. This can significantly reduce the amount of money available for retirement.
Many people face the difficult reality of needing to access their retirement savings before planning. Unexpected expenses or job loss can force their hand, but this decision can severely limit their financial security later in life.
Retirement savings benefit tremendously from compound interest, where your money grows exponentially over time. Taking money out early disrupts this growth, leaving you with a smaller nest egg. Additionally, the lost time you could have been accumulating funds compounds the issue. You might also have less available to contribute back into your accounts, further hindering your future balance. Depending on your plan and age, penalties can also chip away at your savings.
Ultimately, while it might seem like a quick fix, tapping into retirement early creates a double whammy – less money growing and less being added for future growth. This can lead to a greater reliance on Social Security, which may not be enough to cover your needs. It’s important to plan for emergencies to avoid jeopardizing your long-term financial health in retirement.
Taking Control of Your Retirement Future
The good news is that you can take steps to improve your retirement outlook. Here are a few tips:
Start Saving Early: The sooner you start saving for retirement, the more time your money has to grow. Even small amounts saved consistently can add up significantly over time.
Invest Wisely: Invest your retirement savings in a diversified portfolio of assets that will grow over time. Consider seeking professional advice to create an investment plan that aligns with your risk tolerance and retirement goals.
Maximize Employer Contributions: If you have access to a workplace retirement plan, such as a 401(k) or 403(b), be sure to contribute as much as you can afford. Many employers offer matching contributions, essentially free money for your retirement.
Delay Retirement: If possible, consider delaying retirement. The longer you work, the more time you have to save and the less time you need to fund your retirement.
Let’s Talk About Your Retirement Goals
Retirement planning can be complex, but it is essential to ensure your financial security in your golden years. We understand that everyone’s retirement goals are unique. We would love to meet with you and discuss your specific needs and develop a personalized retirement plan. Schedule a complimentary consultation today and let’s talk about your retirement dreams!
Source:
Unknown Author. “10 Surprising Stats About the State of Retirement in America.” Yahoo Finance, 20 Aug. 2020. https://finance.yahoo.com/news/jaw-dropping-stats-state-retirement-200025720.html.
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For more complete information about your 401(k) investment options, call your company’s plan administrator or your financial professional for a prospectus. The prospectuses contain details on investment objectives, risks, fees, and expenses, as well as other information about your plan’s investment options, which you should carefully consider. Please read the prospectuses thoroughly before sending money.
We are not affiliated with the Social Security Administration or any other governmental agency.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
Investing involves risk, including possible loss of principal. No investment strategy can ensure financial success or protect against losses.
