We’ve all been through a lot in the past few years, first with the pandemic, now with record inflation and talk of an imminent recession. So it’s no surprise that people aren’t feeling optimistic about their chances of a comfortable retirement right now. According to BlackRock, nearly one in five workers don’t feel they can afford the retirement lifestyle they want, and another fifth aren’t sure if they’ll be able to save enough.
If you belong to any group, it’s natural to feel stressed. But there may be a way to get things back on track. Try the following.
Find out what it means to be “on track”.
There are several reasons why you feel that you are not on the right track retirement plans. You may have a monthly savings goal that you know you’re not meeting. Or you may not know exactly how much you need for retirement.
In the latter case, the first step is to create a retirement plan so you know exactly how much you need to save. You can do this in several ways. One strategy is to save 25 times your annual income. This is supposed to help your money last at least 30 years. You can also create a customized retirement plan based on how long you plan to live, how much you expect to spend per year, and how fast you think your investments will grow. A pension calculator can take all this information and help you figure out a good savings goal.
Take stock of what you have
The next step is to note what you already have. This includes retirement savings in workplace pension plans, IRAs, health savings accounts (HSAs), and anywhere else. Don’t forget about retirement accounts from former employers. Write down all their balances and what you invested in.
Also note how much time you have left until your planned retirement date and keep track of how much money you’re putting into retirement regularly. If you earn a 401(k) match from your employer, record that as well. You will need this information to create your new retirement plan.
Review your retirement savings strategy
Review all the information you’ve gathered to see if there are any obvious changes that could help you. For example, you could transfer money to the old one 401(k) in an IRA where you could invest in affordable index fund rather than the expensive mutual fund he currently sits in. This can save you money in fees and potentially improve your profitability.
Or you could put more money into your 401(k) instead of your IRA if you haven’t claimed enough to get a full employer match in the past. If you don’t have access to a 401(k), you may want to consider opening an HSA and putting some of your retirement savings there to supplement your IRA.
Of course, sometimes the only solution is to get more money into your own retirement accounts. In this case, you can try to cut some other expenses or negotiate a salary increase at work. Also look for other, higher paying job opportunities.
If all else fails, delay retirement
If you can’t make your current retirement plan work, then it’s time to change plans. You may not want to delay retirement, but it’s a better choice than retiring anyway and taking pennies until your savings run out.
You may not have to delay retirement for long, either. Even a few months can make a big difference. This gives you more time to save, but it also shortens the length of your retirement and lowers its cost.
Everyone’s situation is unique, so it’s ultimately up to you to decide how much longer you want to work. But try to hold off until you feel confident that you have the money to cover your basic expenses.
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