When it comes to retirement planning, working Americans are primarily on their own — pensions are a thing of the past and the future of Social Security is increasingly uncertain. As the retirement landscape continues to change, so do Americans’ expectations about this phase of life.
Many of the pre-retirees we speak to say they’re not interested in following an established retirement road map and want to stay professionally engaged. Others tell us that saving enough to live off of for 20 to 30 years simply isn’t feasible. The 2018 Capital One Financial Freedom survey found that while two-thirds of Americans (65 percent) say they’re confident in their financial future, many have a long way to go — just half have a long-term financial plan, and among non-retired Americans, nearly one-fifth don’t expect to or don’t know if they’ll ever retire.
Given these dynamics, it’s important to take the time to reflect on your own financial situation, long-term goals and timeline for working and generating income so you can take control of your financial life.
Here are three tips to help you build a realistic retirement strategy so you can enjoy this evolving, yet exciting, time:
1. Take control of your financial situation. When you start thinking about the future, begin by answering these three questions — do you have credit card debt, and a game plan to manage it? Have you established three to six months of emergency savings? And are you leveraging a 401(k) or an individual retirement account?
Working to reduce debt and build up savings is an important first step in building a long-term financial plan. Don’t forget to also reflect on your goals and consider how much money you’ll need to reach them.
Retirement looks very different to different people, and it’s important to enter this phase with eyes wide open. When determining how much to save, understand your timeline, risk tolerance (how you handle the markets ups and downs) and future plans — will you move, travel or pursue new hobbies? You should also prepare for unexpected and rising costs, like health care. If you’re not sure how much to put away, common wisdom suggests saving 10 to 15 percent of your income, but if that’s not feasible starting small is OK too.
The important thing is to start saving something now.
2. Think about ongoing income streams for your future. As you begin planning for the future, think through how a combination of savings, benefits, wages and investment income can work together to support you. If you don’t want to keep working full-time but living off your nest egg isn’t practical, explore transitional employment options or consider selling real estate or other assets.
And remember, it’s never too late to start saving — even if you haven’t saved aggressively earlier in life, you can still make the most of accounts like 401(k)s and IRAs now. Try to stay proactive and don’t dwell on missed investing opportunities. Focus on what you can do now, which can make a big difference for you and your loved ones.
3. Put yourself first. Putting yourself last has serious consequences for your financial future and may have an adverse impact on others, too. In fact, The Pew Research Center recently reported the number of parents living in their adult children’s households has doubled since 1995 (increasing to 14 percent). Understandably, many of us put our family first and prioritize our children’s education costs over retirement planning, but the later you start planning for your future, the less time you have to grow your nest egg. You can always take out education loans, but you can’t borrow for retirement.
Whether retirement is right around the corner or further out on the horizon, it’s important to take steps to gain control of your financial life and build a specific plan that works for you.
No matter your age or stage of life, establishing sound financial habits helps give you the security and flexibility to enjoy retirement on your own terms.
Source: Yahoo Finance
