The volatility in the stock market over the past few years has resulted in many investors seeing their retirement accounts shrink in value. While the stock prices may rise over time, many individuals are being forced to re-examine their retirement plans. For individuals with less time until their planned retirement, a review of their financial future may be essential.
Basic Retirement Planning
The fundamentals of planning for a financially secure retirement are simple – have enough money accumulated at retirement so those savings and the earnings on those savings will enable you to afford the lifestyle you want through your retirement years.
Unfortunately, market declines and reduced expectations for future market returns are playing havoc with many retirement plans within the current environment. Here are some options to consider as you refine your retirement plan:
Save more while you are working.
- Take full advantage of any company offered retirement plan. If you participate in a 401(k) plan contribute as much as you can or at least enough to earn the entire match the company may offer.
- Set up an automatic savings plan earmarked for retirement.
- Examine your monthly household spending to see if there are ways to spend less. Refinancing your mortgage, increasing your insurance deductibles and reducing spending on discretionary items can add up.
Earn more on your retirement assets before you retire.
Examine how your funds are invested and how your “cash” is employed. A well thought-out asset allocation for your investments, one that incorporates your time and risk tolerance, can provide diversification and some peace of mind. Generally, the younger you are, the more of your long-term investments should be in equities. Over time, high-quality stocks have produced greater returns than bonds and cash investments.
Work longer before you retire.
Delaying your retirement enables you to have more for retirement in several ways:
- While working, save more in your retirement plan and through regular savings.
- On tax-deferred retirement accounts, leaving all your funds within the account enable them to grow faster.
- Delaying collecting Social Security will increase your monthly benefits. If you are currently 55 years old, you can start collecting full Social Security retirement benefits at age 66. If you start collecting at age 62, you will only get 75% of that amount.
Spend less during your retirement years.
Everyone wants a “full and active lifestyle” during retirement. What does a “full and active lifestyle” mean to you? Less travel, less expensive cars, foregoing a second home (or opting for a smaller one) will make a difference.
What you do not spend during your lifetime will pass to your heirs. It may be unpleasant to consider, but spending time with your family discussing your finances can help them prepare as well.
By taking time to evaluate your comprehensive retirement plan, you may find ways to save more and invest your funds wisely allowing the retirement you seek to be possible.