According to a recent study, many Americans are struggling to reach their retirement savings goals. The Economic Policy Institute found that the average family between the ages of 44 and 49 has only $81,437 saved for retirement. That number is $124,831 for those between ages 50 and 55 and $163,577 between ages 56 and 61.1
If you’re among those who are behind, the good news is you can take action now to catch up. You may have to make some adjustments to your plans and vision, but you can still be able to fund an enjoyable retirement. Below are a few tips to get you started. The longer you wait, the more challenging your retirement might be. A big part of planning for retirement is developing a budget. Your retirement budget should give you an idea of how much income you will need in retirement. By developing a budget, you can also make adjustments where needed so your planned expenses fit within your projected income.
Your budget may include a number of different items. You will likely have some fixed expenses, such as housing, insurance, utilities and possibly debt payments. You will also have some discretionary expenses. Discretionary expenses are optional and adjustable, such as dining out, entertainment, shopping and travel. Are you hoping for an early retirement? Even if you don’t plan on retiring early, it still makes sense to consider the possibility. Many people are forced into early retirement because of job loss, disability or other challenges. If this happens to you, a contingency plan could help you better manage the situation.
One of the biggest challenges in early retirement is generating income from your accounts. If you’re like many Americans, you’ve used tax-deferred accounts such as an IRA or a 401(k) to save for retirement. These accounts let you defer taxes on your growth until you take distributions. That tax deferral may help your assets compound faster than they otherwise would. If you’re like most people, you probably have a number in mind when it comes to a target for your retirement savings. But is that number accurate? According to a recent study from Fidelity Investments, it probably isn’t. The study found that 75 percent of those surveyed underestimated the amount of money they would need to fund their retirement.1
It can be difficult to tell whether your retirement savings target is accurate because there are so many unknown variables. After all, it’s impossible to know how long you will be retired. You don’t know what the economy will be like during your retirement or how much certain items will cost. You can’t predict things like medical issues or other emergencies. |
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