3 Ways to Reduce Retirement Savings Stress Right Now
To say 2020 has been challenging for many Americans is an understatement. The financial strain and uncertainty have left many of us feeling uneasy about our retirement accounts. Keep reading for 3 ways to reduce retirement savings stress right now.
#1 Plan for Retirement
If you don’t have a clear path to where you want to be in retirement, you’re probably not going to end up there.
This may sound obvious, but many people fail to set a plan for retirement.
For some, it may be because they think their account balance isn’t big enough, so why bother.
Others may think they are too close to retirement to plan.
And then there are those who think they don’t have to think about it right now because they just entered the workforce.
Whatever the case, if you don’t have a plan, chances are, you aren’t going to have enough money to comfortably retire.
With rising healthcare costs, inflation, taxes, down markets, and the financial strain this virus has put on all of us, one thing is certain…
If you don’t have a plan and take action on that plan now, you’re likely not going to have enough to retire.
Or worse, you’ll end up with so little saved that you might have to struggle to survive.
Let’s say you have a $300,000 average balance at retirement and you are making $60,000 per year when you retire. How long are these funds going to last you in retirement?
Will this give you the retirement you truly desire? For most, the answer is no.
Here’s what you can do today to get a plan in place…
- Take the time now to create a plan for retirement. If you created a plan years ago, but haven’t followed it, then hit the reset button and start planning.
- Ask yourself at what age you want to retire. How much money will you need to create the income you’ll need in retirement? Write it down.
- Look at how much you’ve saved already compared to what you need, and then figure out how much you need to save each pay period to achieve that goal.
Let’s say you’re 42, you have a 401(k), and you want $1 million by the time you’re 70 (when you plan to retire). You must have $10,000 in savings today, save $10,000 for the next 28 years, and then earn 7.5% percent each year to reach $1 million. It might sound impossible, but with a plan that reduces spending and increases the amount saved, it can be done.
Don’t get discouraged if your 401(k) balance is low. The point is you’re doing something now to get on track to have the retirement lifestyle you desire.
- If you get stuck or are unclear, reach out to an expert sooner rather than later.
Check out our retirement calculator to calculate how professional help may improve your future retirement income.
#2 Review Your 401(k) Statements
Many investors are apathetic about their retirement savings and don’t even open their 401(k) or other retirement plan statements.
This is often because many people think their employer is taking care of their 401(k)s for them. This thinking is inaccurate because employers do not and cannot manage employees’ 401(k)s.
Whatever the reason, when statements come in the mail each month, people often toss them in a drawer.
Rather than managing their 401(k)s, too many people hope they’ll have enough saved for retirement.
Although reviewing the statement for your 401(k) plan might not be the most exciting read, it is important that you have a good understanding of the information that is provided to you.
Opening and reviewing your statements also helps you determine whether or not you’re on track to meet your financial goals.
Do you open your statement every month? And, do you understand why you get what you get?
If the answer is no to both questions, we recommend you become engaged with your retirement savings. Open your statements.
If you don’t understand what you’re receiving, then reach out to an expert for help. Doing so may have a big impact on your overall returns and confidence about achieving your goals for retirement.
#3 Seek Third-Party Expert Guidance
A May 2014 study conducted over a 6-year period compared those who had help with managing their 401(k)s and those who did not. The study revealed…
“On average, the median annual returns for participants in the study who got Help were more than 3% (332 basis points, net of fees) higher than people who didn’t get Help.”¹
Add that up over the years, and 3% higher annual returns just by getting expert help can add up to tens of thousands of dollars you could potentially save.
Just think about the difference a potential 40% increase in your retirement income might do for your retirement!
How much could that be, and how would you use it come retirement?
It doesn’t matter how much or how little money you have saved for retirement, or how much debt you are carrying…
A third-party expert can help you create a plan to get out of debt, fund your emergency account, and maximize your retirement savings.
Check out our no-cost guide on The Different Types of Licenses Financial Advisors Have and What They Mean to You .
Sources
- AON Hewitt “Help in Defined Contribution Plans: 2006 through 2012” Published May 2014
- David Blanchet, Morningstar Analyst 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”
