Creating a comfortable retirement is probably the single biggest financial challenge that anyone can face. A GoBankingRates.com study has found that 56% of workers surveyed had less than $10,000 saved towards retirement. Worse yet, nearly one-third of workers age 55 and older reported no retirement savings.
The 10 years leading up to retirement is the most critical time when preparing for retirement. That time is known as the peek accumulation phase with high income and low debt. With the proper planning, you can still grow your nest egg and achieve the retirement you deserve.
Assess the Current Situation
Nobody likes to admit that they are ill=prepared for retirement, but this is the time for honesty. Its time to sit down and access where your shortfalls are. The first step should be to figure out what you currently have. Add together all your retirement assets like your 401(k)s, 403(b)s, IRA’s, pensions, and even bank accounts. Next, you need to figure out what you need. Figure out a rough estimate of your current annual spending and then grow it by inflation every year.
Identify Sources of Income
Existing retirement savings should provide the lion’s share of monthly income in retirement, but it may not necessarily be the only source. Additional income can come from a number of places outside of savings, and you should also consider that money. Most workers qualify for Social Security benefit and you should start considering when you are going to take them. If you take them before full retirement age your benefit will be reduced. Every year that you delay after full retirement age will grow by 8%. Also, be sure to add any pensions that you may have into your projected income.
Consider your retirement goals
What does retirement look like to you? Are you going to downsize and work part-time? Or, maybe you’d like to travel the world? Writing out your retirement goals can help give you a clear picture of how to get there.
Set a retirement age
When would you like to retire? Just because full retirement age is 65 or 66 does not mean that is when everyone does. Whether you plan on working into your 70’s or retiring early at 55 will have a significant impact on how much you need to live comfortably.
If your income allows it, you should be maxing out your retirement plans such as 401(k)s and IRAs. When you are over the age of 55 a special catch up contribution is permitted increasing the overall limits. If you can max these plans out and still have excess funds, consider putting money away and investing it in a taxable account. If you find that you cannot max out your retirement plans you may need to consider cutting back expense for the next 10 years to allow more saving.
Build your investment plan
This is one of the most important steps when planning for retirement. Your savings need to be coupled with an investment plan that allows for long-term growth that will outpace inflation over the course of retirement. Most people tend to get overly conservative in their investment allocating too much of their portfolios to bonds. The current rate environment makes this a risky investment over the long-term as the returns will not outpace inflation. There are better options than bonds to reduce the risk that you should consider.
Whether retirement is fast approaching, or you would like to get a head start at a younger age, we can help. Our advisors will work with you to create a plan for the retirement that you deserve. Call us at 610-825-3540 or schedule an appointment using the Speak to an Advisor tab. We look forward to speaking with you!