A recent survey indicates that 1 in 4 Americans is worried about running out of money in retirement. At Annex Wealth Management, we’ve been working with people for years, sitting on the same side of the table with them as we budget and strategize towards their retirement goals. Here are 6 insights that may help you approach retirement with less fear
Create A Financial Plan
You could argue this is the only step you’ll need, since everything that follows should be in your plan. Retirement isn’t something you can fix with a “fix-it” YouTube video – it requires a comprehensive view of your goals and the obstacles you face. In other words, a plan understands where you are now, and how to get where you want to go.
Don’t Pretend To Be Rich
Most Americans would rather spend their money now, and put material things before adequate, sensible savings for retirement. They might want to keep up with their neighbors, or just find solace in acquiring things.
Problems with these philosophies abound, but the facts are that Americans just aren’t saving enough. 2/3 of Americans aren’t even investing in an employer-sponsored plan, which doesn’t portend well for their retirement future. A financial advisor will help you with this when you’re setting up your plan, but a good guess is you should be saving around 10 percent of your earnings for retirement.
The 65 year old retirement age was developed long before today’s advances in diet, health and medicine. We are living longer, and maintaining our faculties much longer than years past. Your financial plan – and your professional career – may be more successful if you focus less on an arbitrary age and more on when your goals and satisfaction meet.
Maximize Social Security
Your first line of defense against running out of money is Social Security. Social Security payments are guaranteed to continue for the rest of your life, no matter how long you live, and are intended to be adjusted for inflation.
While those guarantees may have an expiration date as we look into the future, let’s focus on the system we have today: there are advantages and strategies that can be employed to maximize your benefits based on when to sign up and coordinating with your spouse. Since laws have recently changed on receiving Social Security benefits, make sure your plan has been amended to integrate those changes.
Don’t Forget About Inflation
While inflation has largely remained in check over the past few decades, it still has to be reckoned with when making your plan. Over the past 20 years, inflation averaged about 3.23%. Make sure to plan that your income in retirement grows to keep up with inflation.
Planning might be a great time to audit your life, possessions, and ask yourself if you truly need as many or all of the things you own. Do you still need four bedrooms? Does your car need to be new? Living with less now may be a significant step towards peace in retirement.