As a member of the ‘wrench generation’, the days of you letting yourself in a back door of your house after school, tossing a Hot Pocket in the microwave and screaming “I want my MTV” are only a distant memory. Now that you’ve hit your 40s and 50s, it’s time to transform that DIY attitude into taking care of your future yourself and your loved ones – financially.
In honor of National Retirement Security Week (the third week of October), now is a great time to focus on your financial plan and make sure your future self will not run out of money. retired. It doesn’t matter if you’ve been saving for decades or just started putting money aside for your golden years, you’ll want to make some adjustments as you approach retirement.
The first step in proactive retirement preparation is figuring out how much you’ll need and how much you’re on track to save. You can use new tools like retirement calculators to get a rough number or work with a financial professional who can help you calculate the numbers.
If there is a worrisome gap between your projected savings and your retirement goals, you are not alone. Over 70% of Americans say a lack of retirement savings is their biggest barrier to financial security. You still have time to make some financial changes that can help close the gap, although the sooner you can get started the better.
And even for those whose economies are on the right track, this is only half the battle. The equally crucial task remains of working with your financial professional to put together a strong retirement income plan, to ensure that those hard-earned savings last as long as you do.
Here are some money moves to consider along the way:
The best way to have more money in retirement is to save more money for retirement. And one of the best places to put those savings is in your 401 (k) account at work, as a pre-tax contribution and with tax-deferred growth. This year, you can contribute up to $ 19,500 to your 401 (k) account, and people 50 and over can contribute an additional $ 6,500.
If you have a high deductible health insurance plan, you may also want to consider putting money into a health savings account. Money invested in an HSA has even more tax advantages than a 401 (k), since it goes into the account tax-free, grows tax-free, and can be withdrawn tax-free. tax for medical expenses now or in the future.
And once you hit critical savings levels and get closer to those retirement years, there are whole new sets of products you and your financial professional can use to help stabilize value or deliver. protection against market volatility that comes at the wrong time. .
If you’re worried that retirement is approaching and you haven’t reached your savings goal yet, postponing your retirement for even a year or two could make a huge difference. Not only will you get a few more years of savings, but it will also postpone your need to start dipping into your savings, and this could help you delay using Social Security before the optimal age to maximize your income.
Another option might be to take on a part-time job or a consultant job after you quit your full-time job. The recent adoption of COVID-fueled remote working by US businesses means you may be able to land a flexible job that you can do during your time – at home.
One way to make sure you never run out of cash in retirement is to have a secure source of income. Generations of your parents and grandparents generally relied on pension plans to provide this type of security, but traditional employer-provided defined benefit plans have become increasingly rare.
This is even more why now is the time to speak to a financial professional to take matters into their own hands – to create a pension-like retirement income stream that can help you protect the results that matter. most. Even if you’ve taken the steps to accumulating savings, gone are the days of relying on the old “4% rule” of systematic withdrawals from your investment portfolio as a sure way to insure. the sustainability of your money. As more and more Americans seek to ensure that their savings will fuel their longer, healthier lives, they are realizing that this so-called “safe withdrawal” rate is anything but.
The good news is that your financial professional can help you evaluate a whole new set of safe income solutions that grew out of the sound financial management practices of traditional pension plans of yesteryear. These can include indexed investment strategies that provide you with income with levels of protection and opportunities for growth even after the income has started, as well as guaranteed lifetime income if account values are zero, or fixed products that can provide guaranteed daily growth in future income. regardless of market performance, without sacrificing the flexibility to adapt to your changing needs. You now have more options than ever to find the right solutions that allow you to put some of your savings to work today, add greater security and the assurance that your retirement income will be there. for as long as you need it.
While having a retirement plan in place will keep you from running out of cash in retirement, it’s also important to periodically review – and adjust – that plan as retirement approaches and after your transition to life afterwards. work. As we learned last year, the market and life can be unpredictable.
Remember, you are just making estimates now, but once you retire you will have a clearer picture of your actual expenses, which may be higher or lower than you planned. Either way, adding some flexibility to your retirement plan is a great way to make sure you’re financially ready for the next stage in your life.
Your future self will thank you.