Many of us are surprised when the government offers something helpful, but in this case, they really have. A new publication from the Department of Labor, “Top 10 Ways to Prepare for Retirement,” actually checks the right boxes for actionable ideas most Americans can use to make sure their retirement years are comfortable, satisfying, and, above all, adequately funded.
And Americans can definitely use the advice! As the DOL notes, only about 40% of Americans have even calculated how much income they’ll need to live in retirement. Not only that, but many aren’t taking advantage of the opportunities they have: something like 30% of Americans who have access to a workplace retirement plan—many with matching employer deposits—aren’t participating at all. When you add these two facts to the statistic that the average American lives at least 20 years in retirement, the sum is a lot of people in danger of an underfunded—and, likely, unsatisfying—retirement.
Let’s take a look at a summary of the DOL’s ten points on how you can make sure you’re ready to retire—and not outlive your income.
- Start saving now. This one seems like a no-brainer, but a 2020 TD Ameritrade survey found that nearly two-thirds of those in their 40s have less than $100,000 in retirement savings, and 28% of those in their sixties have less than $50,000.
- Know your goal. Don’t be a part of the 60% of the public who are sailing blithely toward the retirement horizon with no idea of what they’ll need when they get to their destination. An easy rule of thumb is that in retirement, you’ll need at least 70% of your pre-retirement income, and it’s actually better to aim for something more like 90%. Take a look at your savings. How long will they provide that kind of income, once you stop working? That’s why estimating your future needs is so important.
- Get with the program. Does your employer offer a 401K, 403B, or some other type of retirement plan? Enroll and contribute regularly. Put the magic of tax-free growth and compounding to work for you as early as possible.
- If you’ve got a pension plan, learn all you can about it. Find out your balance, and calculate what your monthly benefit will be in the future. If your spouse has a plan, gather as much information as possible. If you intend to leave your present employer, find out if your pension benefit or balance is portable.
- Learn the basics of investing. Do you know how inflation affects your savings? What about market risk? What’s the best type of asset for long-term growth? It’s not hard to learn a few foundational principles, and knowing them can keep you from going down a lot of dead ends.
- Keep your hands off. The key to a healthy retirement fund is leaving it alone and letting it grow. Resist the temptation to rob your “retirement cookie jar.”
- Talk to the boss. If your employer doesn’t offer a retirement plan, consider asking them to set up a simple program. It can be done pretty inexpensively, and it could even help them retain more qualified employees.
- Open an IRA. Even if your employer doesn’t offer a plan, you can open an IRA account and make regular deposits that will grow tax-free. You can sock away $6,000 a year, even if you’re a non-working spouse.
- Know your Social Security benefits. Especially if you’re within 10 years or less of retirement, login to the Social Security website (ssa.gov) and set up your free online Social Security dashboard. Why do it so early? Well, for one thing, it will make it more difficult for an identity thief to falsely claim your Social Security benefits. Even though Social Security benefits make up an average of only about 40% of most retirees’ income, it’s an important benefit that you’ve earned. So make the most of it.
- Learn more. Start by reading the publication linked at the top of this article, and go from there. The more you know, the more control you’ll have over your retirement.
As a fiduciary financial and wealth advisor, Empyrion Wealth Management is professionally and ethically bound to offer advice and recommendations with the client’s best interest foremost, at all times. Click here to read our article prepared especially for thriving retirees, “Your Retirement Mission Statement: Why You Need One.”
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