We've all been through a lot in the last few years, first with the pandemic, now with the record inflation and talk of a looming recession. So it's not surprising that people aren't optimistic about their chances of retiring comfortably right now. Nearly one in five workers don't feel they can afford the retirement lifestyle they want, according to BlackRock, and another fifth aren't sure if they can save enough.
If you belong to either group, it's natural to feel stressed. But there might be a way to get things back on track. Try the following.
Figure out what being “on track” means
There are a few reasons you might feel like you're not on track for your retirement plans. You may have a monthly savings target that you know you're not meeting. Or you might not know exactly how much you need for retirement at all.
In the latter case, the first step is to create a retirement plan so you know exactly how much you need to save. There are a few ways you can do this. One strategy is to save 25 times your annual income. This is supposed to help your money last at least 30 years. You can also create a custom retirement plan based on how long you expect to live, how much you think you'll spend per year, and how fast you think your investments will grow. A retirement calculator can take all this information and help you figure out a good savings goal.
Take stock of what you have
The next step is to make note of what you already have. This includes retirement savings in workplace retirement plans, IRAs, health savings accounts (HSAs), and anywhere else. Don't forget about retirement accounts with former employers, either. Make note of all their balances and what you're invested in.
Note how much time you have until your planned retirement date too, and keep track of how much money you're regularly contributing for retirement. If you earn a 401(k) match from your employer, record this as well. You'll need this information to craft your new retirement plan.
Revisit your retirement savings strategy
Look over all the information you've collected to see if there are any obvious changes that could help you. For example, maybe you could roll over the money in an old 401(k) into an IRA, where you could invest it in an affordable index fund rather than the costly mutual fund it's currently in. This could save you money on fees, and potentially improve your returns.
Or you could put more money into your 401(k) instead of your IRA if you haven't been claiming enough to get your full employer match in the past. If you don't have access to a 401(k), you might consider opening an HSA and throwing a chunk of your retirement savings in there to supplement your IRA funds.
Of course, sometimes the only solution is to get more money into your retirement accounts. In that case, you could try slashing some other expenses or negotiating a raise at work. Look for other, better-paying job opportunities as well.
When all else fails, delay retirement
If you can't make your current retirement plan work, then it's time to change your plan. You may not want to delay retirement, but it's a better choice than retiring anyway and pinching pennies until your savings run out.
You may not have to delay retirement long, either. Even a few months can make a significant difference. It's giving you additional time to save, but it's also shortening the length of your retirement and reducing its cost.
Everyone's situation is unique, so it's ultimately up to you to decide how much longer you want to work. But try to stick it out until you feel pretty confident you have the money to cover your basic expenses.
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