Is retirement on the horizon? Worried that you don’t have enough money saved? You have company. According to a Gallup survey, more than 50 percent of Americans are worried about not having enough money for retirement. In fact, retirement is Americans’ top financial concern.1
Those concerns may be justified, especially for baby boomers. Research from the Transamerica Center for Retirement Studies found that baby boomers have a median retirement savings balance of $147,000.2 That may be a sizable amount of money, but it’s unlikely to be enough to fund a long retirement.
The good news is that you can still get your retirement back on track, but you may need to act quickly. If you don’t have a catch-up plan in place, now is the time to develop and implement one. A financial professional can help you create your strategy.
Estimate your savings gap.
The first step in any plan is to determine what you want to accomplish. In this case, your goal is to overcome your savings shortfall, or savings gap. The first step is to calculate what your gap is.
Start by estimating your spending in retirement. You can’t predict exactly how much you’ll spend, but you can create a reasonable projection based on your current spending and inflation. Then estimate your projected annual income from Social Security, pensions and other sources.
Does your income cover your estimated expenses? If not, you’ll have to fund that spending with distributions from your retirement savings. Your savings gap is the amount of money you need to save to create those distributions. Again, this calculation may be difficult, but a financial professional can help you target the right number.
Save more money.
This step may seem obvious, but it’s probably the most effective thing you can do to overcome your savings gap. It also may be the most difficult to accomplish. After all, you probably have other financial obligations that feel more urgent. It may seem hard to allocate more money to retirement when you’re also struggling with debt or paying for a child’s education.
Create a budget and look for areas to cut your spending so you can contribute more money to your retirement accounts. If you can’t cut spending, you may need to look at ways to generate more income. The earlier you start saving more money, the easier it will be to hit your goals.
Adjust your retirement plans.
It’s possible that you may be saving as much as possible and still can’t hit your savings target. If so, you may need to adjust your plans for retirement and scale back your expected spending. If you spend less money each year in retirement, that means you’ll need less money saved to fund your lifestyle. Cutting your planned spending could help you overcome your gap.
There are a number of ways you could do this. For instance, you could work a few years longer, which would give yourself extra time to save and eliminate a few years of spending. You could also delay your Social Security filing, which would increase your benefit amount.
Perhaps you could downsize to a smaller home or relocate to an area with a lower cost of living. Maybe you could cut your planned spending on discretionary items such as travel, shopping or hobbies.
Ready to develop your retirement catch-up plan? Let’s talk about it. Contact us today at Spicer Wealth. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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