1 in 5 workers say their retirement savings are not on track. Here’s how to get yours back on track. | Smart Change: Personal Finances
We’ve all been through a lot in recent years, first with the pandemic, now with record inflation and rumors of an impending recession. So it’s no surprise that people aren’t optimistic about their chances of retiring comfortably right now. According to BlackRock, nearly one in five workers don’t think they can afford the lifestyle they want in retirement, and another in five don’t know if they can save enough.
If you belong to either group, it’s natural to feel stressed. But there might be a way to get things back on track. Try the following.
Understand what it means to be “on track”
There are a few reasons why you might feel like you’re off track with your retirement plans. You may have a monthly savings goal that you know you won’t reach. Or you may not know exactly how much you need for your retirement.
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In the latter case, the first step is to create a retirement plan so you know exactly how much you need to save. There are several ways to do this. One strategy is to save 25 times your annual income. This is supposed to help your money last for at least 30 years. You can also create a personalized retirement plan based on your lifespan, how much you expect to spend per year, and how fast you expect your investments to grow. A retirement calculator can take all of this information and help you determine a good savings goal.
Take stock of what you have
The next step is to write down what you already have. This includes retirement savings in workplace retirement plans, IRAs, health savings accounts (HSAs), and everywhere else. Also, don’t forget about retirement accounts with former employers. Take note of all their balances and what you are invested in.
Also note how much time you have left until your planned retirement date and note how much money you regularly contribute towards your retirement. If you win a 401(k) match from your employer, write that down as well. You will need this information to develop your new retirement plan.
Review your retirement savings strategy
Review all the information you’ve gathered to see if there are any obvious changes that might help you. For example, perhaps you could move the money from an old 401(k) into an IRA, where you could invest it in an affordable index fund rather than the expensive mutual fund it currently sits in. . This could save you money on fees, and potentially improve your returns.
Or you can put more money into your 401(k) instead of your IRA if you haven’t claimed enough to get your full employer match in the past. If you don’t have access to a 401(k), you might consider opening an HSA and throwing some of your retirement savings into it to supplement your IRA funds.
Of course, sometimes the only solution is to get more money into your retirement accounts. In this case, you might try cutting other expenses or negotiating a raise at work. Also look for other higher paying job opportunities.
When all else fails, delaying retirement
If you can’t make your current retirement plan work, it’s time to change plans. You might not want to delay your retirement, but it’s a better choice than retiring anyway and pinching pennies until your savings run out.
You may not have to delay your retirement for long either. Even a few months can make a significant difference. This gives you more time to save, but it also shortens the length of your retirement and lowers its cost.
Everyone’s situation is unique, so it’s up to you how long you want to work. But try to hold on until you’re pretty sure you have the money to cover your basic expenses.
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