It’s not easy to know if you’re saving enough for retirement. According to the Employee Benefits Research Institute (EBRI) 2022 Retirement Confidence Survey,[i] 7 in 10 workers are at least somewhat confident about having a comfortable retirement. For the one-third of workers who feel less confident, the pandemic, inflation, and cost of living are cited as the reason for their concern.
We can’t predict what challenges may be coming, but everyone can take steps to reach their financial and retirement goals. The first step to consider is at what age you plan to retire. EBRI reports that age 65 is the median expected retirement age.[ii]
When estimating your retirement age, it may be wise to be conservative. Nearly half of retirees retire earlier than expected, and two-thirds who do retire early cite reasons that were out of their control, such as health, company downsizing, or caregiving for a loved one. In addition, 70% of workers think they will work for pay in retirement, but only 27% actually do.[iii]
Next, it’s time to estimate how much income you’ll need in retirement. A common rule of thumb is for your annual retirement income to be between 60% and 80% of the salary made in your final working year. Consider how much you’ll receive from Social Security and how much you’ll need for healthcare, hobbies, and travel. Don’t forget to factor-in inflation. You may be surprised how quickly expenses can add up.
Once you have an idea of how much you’ll need, consider all the tools that offer tax advantages that can help your savings grow. These qualified retirement accounts include individual retirement accounts (IRAs), Roth IRAs, and company-sponsored retirement plans.
After you’ve put all the pieces in place and established an investment strategy, you should review it at least once a year to make sure your investments continue to align with your goals. Your investments may gain or lose value, and personal circumstances can also impact your financial situation. Don’t hesitate to ask for the guidance of a financial professional, who can assist you with evaluating your strategy and help you to meet your retirement goals.
Everyone’s goal is generally to have a comfortable retirement. A helpful way to do that, is to establish a savings goal that meets your timeline and to take advantage of all the options you have to contribute to tax-deferred retirement accounts.
If you’re over the age of 50, you can also take advantage of the catch-up contribution provisions within certain qualified retirement accounts that allow you to increase the potential for additional tax-deferred growth.
Review your asset allocation regularly to make sure you’re still on track to meet your goals. As you get closer to retiring, you may need to adjust your target asset allocation.
[i] “2022 Retirement Confidence Survey,” Employee Benefits Research Institute, ebri.org
[ii] Ibid.
[iii] Ibid.
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