A 2021 study shows that 51% of U.S. households are at risk of not sustaining their pre-retirement income in retirement. You might say “That’s no big deal, because my expenses will be lower.”
Maybe you will not have a mortgage, the kids are out of the house, you will not have a commute, etc. While those things are true, what about travel, seeing children and grandchildren? Do you plan to enjoy your life or just sit around the house not doing much? Even if you don’t have expensive tastes, you may eventually have some health issues and you will want to make sure you have enough money to take care of yourself.
Another shocking statistic, according to a 2019 U.S. government study, only 55% of households ages 55–64 have any kind of retirement savings account. This is alarming, and a worse place to be than the first statistic. Let’s assume you have $100,000 saved for retirement at age 60. How long do you think that will last you? Do you believe Social Security will be enough? Don’t bet on it!
I’ll share one more worrisome statistic: It is estimated that by 2050 there could be a $130 trillion savings gap in the U.S. This means people will outlive their savings by 10–20 years. That means many will be living in poverty. Please don’t let this happen to you.
Fortunately, there are ways you can catch up and even get ahead. If you have a work retirement plan, you can not only make contributions that get you a match, but you can also add catch-up contributions if you are over the age of 50. You can put away more money tax-deferred and potentially even more into Roth accounts for future growth. The point is there are ways to make sure you aren’t a part of this devastating statistic.
One of the biggest issues plaguing so many Americans is debt. Whether it’s a result of borrowing to go to college, just the fact that we have so many fun things available to buy, or inflation, we tend to spend more than we make. The more debt one incurs, the more difficult it is to dig out of.
It’s so important to have a budget and look for ways to allocate your money more efficiently. People find it enlightening and often surprising when they actually look at where their money is going. You may not realize that eating out is costing you $500 per month or those subscriptions are over $200. Perhaps your car or home insurance isn’t as efficient or cost effective as you thought. You may be paying $500–700 per month for a car payment.
There are a lot of ways you can find to reallocate your budget to savings. The most important one is to pay yourself first. Treat your savings as a bill that you have to pay. The recreation money needs to be the last in order of importance. You need to pay your bills and sometimes that means making sacrifices now so you don’t have to make them later. That new $1,000 smartphone would look cool, but if your current one lasting another year means you can put that $40 per month away for retirement, you may want to consider that as a very good option. Here is a secret: very few people will remember whether you had the coolest phone or the most expensive car and they will like you even if you save money (assuming you are a nice person, of course).
Working with a financial advisor can be a big benefit for so many people. We are able to help you take an inventory of where you are and show you a path to where you want to go. In the end, it’s your values that are the most important, and you’ll want to deploy your assets in the most efficient way to make sure you are going to meet your goals. Maybe it’s a strategy to pay less in taxes or put money away for your children. Perhaps you don’t have enough life insurance, or the investments you have aren’t as efficient as they could be.
Putting together a plan and being intentional with your money can make a world of difference. Don’t worry if you don’t have it all together—you don’t need to, you just need to get started. Small steps now can be the difference between enjoying retirement or deciding if you should eat or pay your electric bill.
Reach out if you would like to talk more about making plans that will help you meet your goals.
(Disclaimer: This article is for information purposes only and is not tax, legal or financial advice. Every person’s financial situation is different, so make sure you have an advisor that will tailor a plan to meet your needs.)
[Photo courtesy of Monica Silvestre / Pexels]
