Failing to meet financial goals necessary for retirement is a growing reality. Market failures, high unemployment, flat real wage growth, and bad personal finance decisions are all contributing factors.
Retirement means different things to each of us. You may see yourself travelling more, enjoying family, volunteering to worthy causes, or just relaxing in your own way. If you prepare, it will generally involve doing less work, and enjoying more leisure time.
If your plans fall short then you may have to continue working; delaying retirement. Social security only replaces about 30% of the average wage in retirement. To be moderately comfortable you will need at least 75% of your pre-retirement income. Assuming social security will be available for you, how will you fund the shortfall?
Listed below are five strategies that may help you achieve your retirement goals, and avoid working forever.
Plan
Financial planning can be a complex process, but is definitely essential. You need to estimate your retirement income needs. A qualified financial planner can then help you calculate where you will find this money. Social security, pensions, savings, and investments are all pieces of the pie that will replace your wage income in retirement.
By knowing this, you can then create a plan today, that will help you make retirement a reality. It’s a cliché, but he who fails to plan, is planning to fail.
Save
You must save some of your income today, so you can use this to live on in retirement. Estimates vary, but aiming to save 15% of your income is desirable. Take advantage of pre-tax savings plans, like the 401(k) or tax-free cash ISAs. Employer matching contributions can also make this easier to achieve.
Invest
Make your savings work for you. Over the course of a working career you have the luxury of time to absorb inevitable market fluctuations. While past performance is no guarantee of future returns, equities provide a higher return than either bonds or cash equivalents. These should form the majority of your retirement investment portfolio.
Investing is not without risk. But by failing to invest in growth assets, you run the risk of not growing your nest egg sufficiently to meet your retirement goals. An investment advisor can help you to structure a diversified investment plan to meet your goals.
Manage Risk
A large financial loss can easily wipe out your life savings. Failing to adequately insure your property, health, life, or liability can be a major financial set-back. An integrated insurance plan can help to cover you in the event of catastrophic loss. Don’t let an insurance oversight be the reason you need to work forever.
Take Debt Seriously
Creditcards.com currently reports that average credit card debt per household is $14,750. All debt makes it more difficult to adequately prepare for retirement. It is simply necessary to spend less than you earn, consistently, and save, to be able to retire. Credit card debt used to fund an unsustainable lifestyle could easily crush your retirement dreams. Live in reality, live within your means.
With the credit card debt skyrocketing, I wonder if bankruptcy is a valid option for some people. At least they could start over and begin to contemplate preparing for retirement.
Bankruptcy would definitely beneifit some. But it’s not always a way out of consumer debt. If the creditors can show that you recklessly incurred debt, knowing that you were aout to file bankruptcy, you might be on the hook.
I know I run a personal finance website but it amazes me how many people fail to even think about their financial future!
Congrats on the new degree – what are you going to do with it?
Thanks Evan. I’m going to become more involved in financial counseling. I prefer helping people in remedial situations rather than helping the super rich hang on to their hoards and pay less tax. I’m a little tied down with parenting commitments, so it makes it difficult to join the 9-5 crowd. I’m really enjoying blogging, and plan on taking it as far as I possibly can.
Ya working sucks. But you got save up to retire…Im trying to figure out how much I would need to retire sooner rather than later and it just seems like so much money. I guess that why you start saving early and often
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Well, you know planning to retire is ok if you have a house, because you can get a reverse mortgage to pay for your finances.
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