Money Myth: You Can’t Bounce Back from Retirement Setbacks
Realizing you have less saved for retirement than you need or hoped for can trigger concern about the future. You want your golden years to play out a certain way—whether that’s traveling, spending more time with family, pursuing hobbies, or all of the above. For many people, though, preparing for retirement is not a straight path.
Things like helping children through college, maintaining a home, or managing unexpected expenses can impact your ability to pursue your retirement savings and lifestyle goals. Regardless of what may have delayed or impacted your efforts, it is never too late to take action. Every step you take now can help build a stronger foundation for the future.
4 Tips for Setting Retirement Savings Goals
1. Evaluate Your Current Position
The first step toward strengthening your retirement preparation is to develop a clear understanding of your current situation. Many people ask, "How long will my retirement savings last?" The answer depends on various factors. A free online retirement savings calculator can help you estimate how much you’ll need to close the gap between your current savings and your future goals. For a more comprehensive and personalized analysis, however, speak directly with our team.
2. Understand Future Expenses
Lifestyle choices—from basic living expenses to travel plans and recreational activities—can have a significant impact on the cost of your retirement. Healthcare is also an important consideration, as medical costs typically increase with age, and specialized insurance coverage, like long-term care, may be appropriate at some point in your journey.
3. Plan for Housing Costs
Housing also factors prominently in retirement planning, whether maintaining a current home, downsizing, or transitioning to assisted living. Regular maintenance, property taxes, and potential modifications for aging in place all affect long-term housing expenses.
4. Account for Inflation
Due to inflation, a dollar today may buy significantly less in future years, so it is important to account for rising costs when estimating long-term needs. The costs of essentials like groceries and utilities are particularly vulnerable to inflation. Planning for these increases helps you set strategic and informed retirement goals.
Key Considerations for Retirement Planning
Understand Social Security's Role in Your Retirement
Social Security is a government program designed to provide income support during retirement. For many people, Social Security is an important source of retirement income.
Social Security benefits are calculated based on your highest 35 years of earnings. Maximizing your income in your remaining working years can help replace those lower-earning years and increase your benefits.
The timing of when you claim benefits is another key factor. Claiming early—as soon as age 62—provides more years of payments but at a reduced monthly amount. On the other hand, waiting until full retirement age (typically 66 to 67) allows you to collect your full benefit, and delaying even further can increase your monthly payments. The appropriate choice depends on factors like your health, life expectancy, and financial needs.
Explore Retirement Account Options
Strategically leveraging different retirement accounts can help you pursue your retirement savings goals. If your employer offers a 401(k) plan, participating can be a practical way to set aside money for retirement. Many employers offer matching contributions, which adds to your savings. Automatic payroll deductions also streamline the process, making it easier to contribute regularly.
For those looking at additional options, Roth IRAs may provide unique benefits. Contributions grow tax-free, and qualified withdrawals in retirement are not taxed. This makes Roth IRAs an appealing option for long-term savings, particularly for those who anticipate being in a higher tax bracket later in life or who value flexibility in retirement income strategies.
Ways to Boost Your Retirement Savings
Take Advantage of the SECURE 2.0 Act
The SECURE 2.0 Act introduced provisions that may enhance retirement saving opportunities, particularly for those nearing retirement. These changes include expanded access to workplace retirement plans, increased flexibility for contributions and distributions, and new catch-up provisions for those nearing retirement.
Make the Most of Catch-Up Contributions
For those aged 50 and older, special catch-up provisions allow for higher limits on retirement plan contributions. This provides an opportunity to accelerate savings during what may be your peak earning years. Contributing beyond standard limits to employer-sponsored plans or IRAs may help strengthen your retirement preparations while potentially offering tax advantages.
Downsize Your Home
An expensive home can impact progress toward retirement savings goals. Downsizing to a smaller home may free up equity that could be redirected toward retirement accounts. Additionally, home sales may offer a tax advantage. Individuals can exclude up to $250,000 of profits from taxes, and married couples filing jointly can exclude up to $500,000. This may make downsizing an appealing consideration as part of your overall financial strategy.
Last Resort: Cash Values on Insurance Policies
If you’ve implemented the above strategies but are still struggling to make progress toward your retirement savings goals, exploring cash-value life insurance policies may be an option to consider. Policies like whole or universal life insurance often accumulate cash value that can be accessed through withdrawals or loans, potentially providing funds to address savings gaps. However, this approach comes with potential trade-offs, such as reducing the policy’s death benefit or triggering taxes. Our team can help you understand the implications and determine if this strategy is an appropriate option for your situation.
The Best Time to Start? Now.
Catching up on retirement savings may feel overwhelming, but having a clear plan can help you focus on what is possible. Every step can help you move forward, and starting now can make a meaningful difference in the long run.
Remember: You don’t have to navigate this process alone. Your financial professional can bring clarity to complex decisions and help you make a solid plan. They can also support you in adapting to changes in your financial situation and identifying strategies tailored to your current circumstances and goals for the future.
Contact the office today to start your retirement discussion.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.
