By Matthew Gaude & Shawn McGuire
Are you confident about your retirement prospects, or does a review of your savings leave you feeling anxious? Even if you’ve saved diligently through the years, there’s always that lingering fear that you won’t have enough money to live a comfortable life in retirement. According to the Employee Benefit Research Institute’s 2016 Retirement Confidence Survey, only 21% of American workers are very confident they have enough money for a comfortable retirement, and 66% of those who have saved have less than $100,000 put away. (1)
Thankfully, even as the clock winds down on your working years, it’s not too late to bulk up your nest egg and get on track. With patience, discipline, and the right guidance, you’ll be on your way to a secure retirement. Here are 6 steps you can take today to catch up for retirement in a hurry.
1. Increase Your Savings Rate
The most obvious thing you can do is save more. Cut back on expenses, channel a healthy percentage of any raises and bonuses directly to savings, and automate savings increases of 1% of your paycheck every few months. It may not seem like you are making much of an impact, but every dollar helps.
Your increased savings can be invested in your company 401(k) or 403(b) plan or your personal IRA. If you are over 50, you (and your spouse, even if only you work) can invest an extra $1,000 per year into an IRA for a total of $6,500 for 2018. The catch-up contribution for those over 50 is even greater for 401(k) and 403(b) plans at $6,000, for a total contribution limit of $24,500. If you’ve managed to max out your IRA and workplace retirement plan and still aren’t saving enough, you can open a taxable brokerage account for your additional savings.
2. Focus On Growth
Your goal retirement date doesn’t have to dictate your investment time horizon. You may be planning to retire in 10 years, but you don’t need to set a 10-year horizon for your investments because you’ll only need a small portion of your nest egg in the early years. The rest of your money may stay invested for another 20 to 40 years. Make sure you invest with the right perspective so you can work toward as much growth as possible.
One thing to remember, though, is not to try to chase unreasonable returns as a way to make up for a lack of retirement savings. With the proper asset allocation, you can diversify your portfolio among different asset classes which seek to balance risk with reward. Taking on excessive risk in an effort to play catch-up isn’t worth the possibility of losing half your money when the next market correction strikes.
3. Review Your Insurance Coverage
Insurance is one of those financial products that most people purchase and then promptly forget about. It would be worthwhile to review all of your insurance policies to ensure that you actually need the coverage you have. Your needs may have changed dramatically since you had a young family, and there is no point in paying for something you no longer need.
Also, you should make sure that you have long-term care insurance in place once you are over age 60. Nothing drains a nest egg faster than living in a nursing home and paying out of pocket. Someone turning 65 today has almost a 70% chance of needing some type of long-term care services, (2) so it is important to consider how long-term care will affect your overall retirement plan.
4. Eliminate Consumer Debt
The less debt you have when you enter retirement, the better. Reducing your consumer debt before retiring helps you lower your monthly expenses and enables your savings to grow and last longer.
Review all current debts you face and compare interest rates and balances. This can help you decide which to pay off first. Once you’ve eliminated credit card and auto debt, see how you can aggressively pay off your mortgage. Not having a mortgage could reduce your monthly expenses by up to a third and make a significant impact on how you spend your savings.
5. Downsize Your Home
As you near retirement, your housing needs will be different than they were when you were raising a family. Many people downsize their homes prior to retirement as a way to reduce or eliminate debt and reduce utility expenses. In addition to the financial benefits of downsizing, a smaller home and yard require less work and cleaning, and a one-story home could be much more practical as you age.
6. Push Back Your Retirement Date
There are several benefits to delaying retirement to work a few more years, or to work part-time during retirement. The biggest reason is that you have more time to earn an income and save. And every additional year that you work is one less year that you will be depending on savings and draining your nest egg.
Working longer will also allow you to delay claiming Social Security. While Social Security benefits can be claimed as early as age 62, the longer you wait to file, the greater the benefit you will receive. If you file at age 62, you will only receive 75% of your earned benefit, but waiting until age 70 allows you to receive 132% of your earned benefit. This can make a substantial difference in your retirement income for the rest of your life.
If you’re considering retiring before your Social Security kicks in, you may want to think again. In that case, you would have to draw down your retirement assets for 100% of your monthly expenses. Waiting until your Social Security benefits begin allows you to let more of your retirement savings remain invested for the future.
If you want to make the most of your Social Security benefits, get your custom Social Security analysis today!
Need Help Catching Up?
There are a number of options for boosting your retirement savings, but investing, insurance, and Social Security rules can be complicated and confusing. This is why it’s important to consider turning to an experienced financial professional to guide you as you work to make the most of your money.
At Live Oak Wealth Management, we help you prepare for every aspect of retirement, including income and tax planning, healthcare decisions, estate planning, and overall risk management. Our goal is to secure, maintain, and protect your financial lifestyle throughout your lifetime.
No matter how old you are or how little you have saved, it’s never too late as long as you get started today. Call 770-552-5968, email [email protected], or schedule an appointment online today for your free one-on-one consultation!
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insights and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.
Is it time for a conversation about your financial future?
Click the link ‘Schedule’ button below to set up an online, phone, or in-person meeting at a time that’s convenient for you.