Did you know that nearly one third of Americans have yet to start saving for retirement? Nearly 75% of those over 40 have also admitted that they will not have enough money saved up by the time they hit retirement age. Saving for retirement doesn't have to be complicated or daunting as long as you have a professional financial advisor to help you come up with a sound strategy. It's time to break this statistical trend about retirement savings, but first it's time to pin down the tell-tale signs that you may not be prepared for retirement. If you notice one or more of these signs, then we highly recommend contacting our financial planning company on Cape Cod.
10 Signs You Aren't Financially Ready To Retire
- You Still Have Debt. With college tuitions through the roof and individuals purchasing cars or homes they cannot afford, it is not unusual to be in five or six figures of debt. If you retire while you still have debt, this can significantly detract from your bottom line savings. We recommend paying down your debt before reaching retirement by reducing credit card payments and eliminating car loans or downsizing your home.
- You Can't Pay Your Bills. If you are struggling to pay your utility or phone bills now, it's important to note that these types of bills don't stop when you're in retirement. You will still need to account for paying the heating bill during the month and your internet bill so you can keep up with friends and family. Enlisting in the help of a certified financial planner can help you get back on track and better manage your money and monthly expenses.
- You Still Need To Purchase Major Expenses. Thinking about that second home on the lake or that sports car? Or perhaps you need to replace the roof or improve your yard's landscaping. If you still have some major expenses to make, we recommend doing those prior to your retirement so that your income can cushion the investment. When you're retired, unless you have a part time job, you will be relying on that hard-earned and hard-saved cash from your retirement savings account.
- You Don't Have A Long-Term Plan. Perhaps you have a short-term plan for saving a few bucks out of every paycheck, but have you stepped back and looked at the bigger picture yet? Sometimes having a long-term plan can help motivate you to reaching your short-term retirement savings goals. It's always important to have a plan that's obtainable and that works with your wants and annual income.
- You Don't Match Your 401k Employer Contributions. 401k retirement plans through employers are increasingly popular these days and many plans also offer matching contributions. If you are already qualified to start and contribute to a 401k plan, then it is important to contribute at least to your company's matching amount. For example, if your employer matches 100% up to 3% of your annual salary, then you should set aside 3% of your annual salary into your 401k. While most individuals opt for 10-20%, the contribution match percentage is a good start.
- Your Only Retirement Account Is Your 401k. While contributing to your 401k is an important aspect of anyone's retirement plan, it's important to also diversify your portfolio. What we mean by diversification is opting for different avenues to save for retirement, such as setting up a Roth IRA account, a Life Insurance policy, or annuity -- all of which provide their own benefits and (if you aren't careful) setbacks if you need to withdrawl money before you reach retirement age. Having a financial advisor to help you diversify your retirement portfolio is the best way to stay organized and maximize your contributions.
- You Haven't Accounted For Inflation. The historical norm for inflation is around 3%, which means over the course of 25 years the cost of living will more than double. Not accounting for inflation rates can have negative effects on how far your retirement funds will stretch. There are retirement planning options that account for inflation rates, such as teasuring inflation protected securities and stocks, that we recommend looking into and that are also extremely safe to invest in.
- You Still Like Working. Some people just love their jobs -- and that's ok! Just because there is a set retirement date for all individuals, doesn't mean you need to retire on time. In fact, we always encourage individuals to continue working for as long as they like. Many people find working a rewarding, socialable and beneficial task. While you continue to work past the standard retirement age, you can also still contribute to these retirement funds -- simply talk to our financial advisors and we can make adjustments accordingly.
- You Don't Know How Much To Save. A common issue for younger working Americans is not knowing how much you need to save in order to be prepared for retirement. If you are putting aside money thinking that, over the course of your working life, this will add up, you may want to talk to a financial planner to determine if this is true or not. Many people are surprised to learn that they need to contribute much more than originally expected to their retirement accounts. It is recommended that you save at least 10% of your annual salary if you start saving in your 20's, or 15-25% if you start saving in your 30's.
- You Aren't Saving Anything. Another common issue we see often is that individuals simply aren't saving any money for retirement. Whether this is a lifestyle that needs to be scaled back, debt that's difficult to pay off, or the income simply isn't enough for the area the individual is living in, there are ways to make it so that you can save at least a small percentage of your annual income for retirement. It is never too late to start and a little savings is better than none.
Do any of these situations sound familiar? If so, please contact Cape Cod Wealth Strategies & Insurance Services, LLC for confidential financial management services. We're here to help you create, manage, and adjust your financial portfolio so that you are more prepared for when it comes time to retire.