Conquer Your Retirement Anxiety with These Six Tips
In a credit union association survey featuring 8,069 respondents, about 73 percent said they had at least one major financial concern about retirement. More than half of the survey’s respondents – about 56 percent – have already retired from full-time employment or plan to retire in the next five years.
According to survey respondents, financial fears surrounding retirement vary. Most – 20.6 percent – are afraid they’ll lose what they’ve invested in retirement accounts due to stock market fluctuations. Another 18 percent worry they just won’t know what they need for retirement and 15.8 percent fear they won’t have time to save what they need, even if they could identify that magic number.
Louisianans aren’t alone with their retirement jitters. In a study of 3,000 Americans by financial firm Allianz Life, 63 percent reported that they feared running out of money in retirement more than they feared death. The study – which included 1,000 baby boomers, 1,000 Gen Xers and 1,000 millennials – found that half of baby boomers believe it is impossible to determine retirement expenses. Another 32 percent of baby boomers nationwide are unsure they’ll ever be able to retire.
These fears are understandable – saving for retirement can be daunting. Conventional wisdom once dictated that workers should save $1 million by the time they retire, but experts now suggest that won’t be enough, according to a U.S. News and World Report article.
Experts traditionally suggested retired people withdraw 4 percent of their savings each year. That would leave a retiree who has a $1 million nest egg about $40,000 to spend annually. On average, adults 65 and older spend almost $46,000 a year, according to a GoBakingRates survey. With those same withdraw rates in mind, the average retiree would need to save closer to $1.15 million before leaving the workforce.
Many Americans aren’t ready for that reality. According to GoBankingRates, 42 percent of Americans have less than $10,000 saved for retirement and 14 percent have nothing saved.
But retirement statistics aren’t completely bleak. Saving for the end of a career may be intimidating – but Americans have been improving.
Baby boomers in the Allianz study showed signs of actively securing help with their retirement savings, a move they hadn’t successfully made in the past. In 2010, 46 percent of boomers said they lacked the tools to figure out how to save for retirement. That number dropped to 36 percent in the most recent study.
According to the survey, 20.3 percent of respondents employ a financial planner. Another 15.1 percent rely on advice from their financial institution, while 13.2 percent seek help from family and friends.
This proactivity has been paying off. The majority of Americans have more than $10,000 saved for retirement. That was not the case in 2017, when only 45 percent of respondents had more than $10,000 saved for retirement, according to a GoBankingRates survey from the time. The number of people with nothing saved for retirement also dropped dramatically between the 2017 and 2018 surveys – by 20 percent.
It’s a change America’s retiring population has been feeling. According to Allianz, 72 percent of baby boomers said in a recent survey they feel financially prepared for retirement. That’s up from 57 percent in 2010.
Tips to Save for Retirement:
The earlier you can start saving for retirement, the better prepared you’ll be. Money in retirement savings accounts accrues compound interest, meaning each year the money in that account generates earnings which, in turn, generate their own earnings. The longer the money sits in the account, the more earnings it will generate. Ideally, consumers should begin saving for retirement as soon as they receive their first paycheck in their 20s. But, if that’s not your reality, it’s important to begin saving as soon as you’re able.
Automate your savings
It can be difficult to put away money for a retirement that can be decades away when you’re focused on affording the present. You may be tempted spend that money on bills, groceries and other immediate necessities. Consider setting up your retirement savings to pull directly from each paycheck. The money will never hit your checking account and you’ll be less inclined to spend it on daily necessities.
Increase savings with increased funds
While it can be beneficial to automate your savings, it’s equally as important to revisit your retirement account contributions over time. If you receive a raise, for example, consider increasing the amount you’re contributing to your 401(k). In addition, consider saving a portion of the money from any bonuses or tax refunds you receive throughout the year.
Make sure you’re getting your company’s match
If your employer offers a match to your employee retirement plan, make sure you’re contributing enough to receive it. Otherwise, you’ll be leaving money on the table that could have helped toward your retirement goal.
Take advantage of government aid
The U.S. government provides incentives for those saving for retirement. For instance, middle or lower-income taxpayers can claim a tax credit for up to 50 percent of their retirement plans. The maximum credit is $4,000 per couple and $2,000 per individual filer. You can also take advantage of catch-up contributions if you’re age 50 or older. Yearly contributions to IRAs and 401(k) plans are limited, but once you reach 50, you’re eligible to contribute beyond those limits.
Saving for retirement is a major undertaking and one that can be confusing. There are online resources available (AARP has a retirement calculator available that can help determine whether you’re on a good track, for example), but often personal advice can be helpful. Consider hiring a professional financial advisor or utilizing help from your financial institution. Credit unions employ financial advisors and Certified Credit Union Financial Counselors who can help members get on the right track for retirement. For more or to find a credit union near you, visit asmarterchoice.org.