While retirement sounds like a simple concept, it's far more complex than one might realize. Here are some ways to help plan for your retirement successfully.
According to the U.S. Government Accountability Office (GAO), almost half of all Americans 55 years or older have no retirement savings.1 In addition, a Transamerica study found that the median household retirement savings amount for workers is only $93,000, leaving many to feel that they don’t have enough saved for retirement.2 But the real kicker is that Social Security payments, the safety net many older generations depended on during retirement are no longer enough for most people to survive.
Hopefully, you have saved more than the average American. But if you have neglected to invest in your retirement and you are still working, there is always time to bulk up your retirement account.
Way #1: Don't Put It Off Any Longer
Many people who reach their late 40s or 50s without adequate savings in the bank fear that it is too late to do anything to make a real difference, so they decide to do nothing at all. But avoiding action is the worst decision. Instead of letting fear paralyze you, let it become a powerful motivating force to get up and start doing something about the situation.
You need a plan to help determine how much money you'll need during your retirement. While there are many methods for determining this amount, one of the quickest is to multiple your expected salary for the last year you work by 10 to 12. This will give you a rough estimate — and for many people, the number is shockingly high.
Now that you have a number to shoot for, you can determine how far off track you actually are from your goal.
Way #2: Reduce Your Expenses Now
One way to improve your lifestyle significantly during retirement is to cut back on your expenses while you are still working. Lowering your monthly spending now can give you the additional money necessary to invest in your 401(k) and take advantage of your company's matching opportunities. Remember for 2021, those under 50 years old can contribute up to $19,500 per year in pre-tax dollars and those older than 50 can make up to a $26,000 contribution.3
Besides giving you extra money to invest, learning to live on less helps you prepare financially and psychologically for retirement. Many retirees find it takes time to adjust to living on a lower income and they often make costly financial mistakes early on. Experiment with your budget now, so you still have the safety net of a steady income if your calculations are off.
One of the biggest expenses most people is their home. If you are considering downsizing to a smaller home once you retire, don't wait. Selling your home and moving into a less expensive option as early as possible will allow you to invest the proceeds from the sale of your home in your retirement fund.
Way #3: Sometimes Waiting as Long as Possible Is a Good Thing
You may have had dreams of walking out of your office on your 65th birthday, but it rarely makes economic sense. If possible, try to put off retirement for as long as possible. Working as few as four years longer can substantially increase the quality of your lifestyle. Besides allowing you to save a significant portion of your earnings, the longer you can delay taking your Social Security benefits, the more you will receive each month.
Saving for retirement is complex and can be confusing. Your best option to rescue your retirement is to speak with a financial advisor who can help you to choose the right strategies for your personal situation. Our team at California Retirement Advisors will be able to guide you through the steps to planning your ideal retirement; feel free to contact us today to set up an appointment to answer all of your retirement questions.
By Christian Cordoba
CERTIFIED FINANCIAL PLANNER™
Founder, California Retirement Advisors
Investment advisory services offered through Mutual Advisors, LLC DBA California Retirement Advisors, a SEC registered investment adviser. Securities offered through Mutual Securities, Inc., member FINRA/SIPC. Mutual Securities, Inc. and Mutual Advisors, LLC are affiliated companies. CA Insurance license #0B09076. This content is developed from sources believed to be providing accurate information and provided by California Retirement Advisors. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. California Retirement Advisors, nor any of its members, are tax accountants or legal attorneys and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional.