Ideas on How to Prepare for Retirement

Retirement income security is one of the biggest worries among retirees and thanks to medical, health, and technology advances it is a valid one. Americans are experiencing higher life expectancy rates which means our money could need to last longer than we planned for. A 2019 survey of retirement plan participants by American Century Investments found that the number one regret among retirees was not saving enough money for retirement.¹

According to PwC’s recent Retirement in America report, the median retirement savings among people ages 55 to 64 is $120,000. Unfortunately, that likely would provide less than $1,000 per month for a retiree, for only 15 years.²

There’s an interesting dichotomy among demographics when it comes to retirement planning these days. There are those who believe they will work beyond age 70, or maybe never retire. Some believe they’ll need to keep working for financial reasons, while others simply want to stay engaged.³ But then there’s another cohort (one-third of workers younger than 54) who aspire to retire by age 55, according to a 2020 survey by the research firm Hearts & Wallets.⁴

While it might seem daunting to add more money to your retirement savings here are a couple of ways you could start, even if you just do one thing you will thank yourself for it later.

• Budget – Take a look at your expenses and find areas you could cut back on and create a savings goal to work towards.
• Pay off High-Interest Debt – one of the best ways to catch up on retirement savings is to pay off debt. Once debts are paid off you could divert those funds to your retirement savings.
• Matching Contributions from Employer – Think of this as “free money”! Contribute enough to take advantage of this benefit and be sure to contribute enough to get the full amount.
• Fully Fund your Retirement Accounts (IRA, Roth IRA, 401(k), etc.) – This means you make the maximum allowed contribution each year.
• Take Advantage of Catch-up Contributions – Many retirement funds allow you to make additional contributions known as “catch-up” contributions – for those turning age 50 and older.

For current retirees or those expecting to retire soon, recognize that the recent rise in inflation is not without its advantages. For example, in April the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased to 4.7% over 12 months ago. This inflation measure is the one that Social Security uses to make annual cost of living adjustments (COLA) to benefits — which means the next COLA increase could reflect that 4.7% increase next year. For context, Social Security benefits rose by only 1.3% in 2021. The actual adjustment will be calculated later this year based on how inflation continues to perform, with the final determination generally announced after the third quarter.⁵

Clearly, the pandemic affected some households’ financial situation more than others. But the primary way to successfully fund retirement is to have a plan, and those who want to retire early generally do. Those who think they’ll never be able to stop working may have either failed to plan adequately or circumstances conspired to send those plans awry. Wherever you are in your planning stage, it never hurts to get advice. We’d be happy to review your current finances — and your retirement plan if you already have one — to either get you on track or ensure you’re still on the right path to retiring when and how you want.

¹ Brian Mayfield. American Century Investments. 2021. “4 Reasons to Rethink Cashing Out Your Retirement.” https://www.americancentury.com/content/direct/en/insights/guidance-planning/retirement/saving-for-retirement/rollover-options/cashing-out-retirement-401k-ira-four-considerations.html. Accessed May 31, 2021.

² PwC. 2021. “Retirement in America: Time to rethink and retool.” https://www.pwc.com/us/en/industries/asset-wealth-management/library/retirement-in-america.html. Accessed June 15, 2021.

³ American Advisors Group. May 6, 2021. “Nearly One in Three Seniors Plan to Work Past 70 or Never Retire, According to AAG Survey.” https://www.prnewswire.com/news-releases/nearly-one-in-three-seniors-plan-to-work-past-70-or-never-retire-according-to-aag-survey-301285256.html. Accessed May 31, 2021.

⁴ Hearts & Wallets. March 16, 2021. “Retirement Resurgence: Americans Who ‘Aspire to Retire by 55;’ Anticipation of Increasing Number of Income Sources.” https://www.heartsandwallets.com/docs/press/press_release_2021-03-16_Retirement_Resurgence_Americans_Who_Aspire_to_Retire_by_55_Goal_More_Income_Sources.pdf. Accessed June 15, 2021.

⁵ David Payne. Kiplinger. June 28, 2021. “What is the Social Security COLA?” https://www.kiplinger.com/article/retirement/t051-c000-s010-what-is-the-social-security-cola.html. Accessed June 29, 2021.