Despite the soaring stock market of the past few years, some Americans are nervous about their ability to retire comfortably - or even retire at all.
Consider these somewhat sobering statistics:
l Almost half of American workers report being “not too confident” or “not at all confident” about being able to afford a comfortable retirement, according to the Employee Benefit Research Institute’s 2013 Retirement Confidence Survey. The 28 percent who say they are “not at all” confident is the highest level recorded in the 23 years of this survey.
l Between 2010 and 2012, the percentage of people 45 to 60 who planned to delay retirement rose to 62 percent from 42 percent, according to the Conference Board, a non-profit business membership and research organization.
If you’re in either of these groups - that is, if you’re concerned about having enough resources to enjoy your retirement years or you’re afraid that you’ll have to work longer than you anticipated - what can you do to possibly alleviate your worries?
Your first step is to get specific about your retirement goals. Have you set a target date for your retirement yet? If so, how many years until you reach this date?
Once you know when you want to retire, you’ll need to come up with some sort of “price tag” for your retirement years. By taking into account your hoped-for lifestyle and your projected longevity, you should be able to develop a reasonably good estimate of how much money you’ll need as a retiree. You may find it helpful to work with a financial professional - someone with the tools and experience to plug in all the variables needed to calculate your retirement expenses.
Next, review your retirement savings vehicles, such as your 401(k) and IRA. Are you contributing as much as you can afford to these accounts? Are you increasing your contributions when your salary rises? Within these vehicles, are you choosing an investment mix that can offer the growth you’ll need to accumulate a sufficient level of retirement savings?
Even after you’ve “maxed out” on your IRA and 401(k) or other employer-sponsored retirement plan, you can find other tax-advantaged vehicles in which to invest for retirement. Again, your financial advisor can help you evaluate the ones that may be suitable for your needs.
Still, even after maximizing your investments, you may come up short of what you’ll need, given your desired retirement date. Consequently, you may need to consider working a couple of extra years. If you like your career, you may find that moving out your retirement date isn’t so bad - you’ll bring in more earned income and you may be able to delay taking Social Security, which would eventually result in bigger monthly checks. Plus, you could postpone your withdrawals from your 401(k) and IRA, giving these accounts more time in which to potentially grow. (Keep in mind, though, that once you turn 70-1/2, you’ll have to start taking money from your 401(k) and your traditional IRA.)
In any case, do what you can to retire when you want - but be flexible enough in your thinking so that you won’t be shocked or dismayed if you need to slightly extend your working years. By “covering your bases” in this way, you can be ready for whatever comes your way.
Brian Humphrey is a financial consultant and investment advisor.