Early preparation is key to retiring how you want on time.
Each week, Consolidated Credit searches for unreported financial research that can help you deal with your debt and budget. This week…
The interesting study
A recent study finds 55-65 year-olds about to retire feel underprepared and regret not saving for retirement sooner – a costly mistake the younger generation can learn from.
TIAA-CREF, a national financial services organization polled 1,000 random adults with retirement plans through their jobsto find out how ready they are to retire. It turns out even though they are taking steps in preparing for retirement, many consumers believe they started too late and may either have to delay retirement or downgrade their living quarters.
The big result
52% of people approaching retirement have regrets.
Many wished they had started saving more of their paychecks and invest their savings “more aggressively” earlier on in their careers. Consequently, they now live in fear that they have not prepared adequately.
The fascinating details
For almost 50 percent of Boomers, money is the most important factor to determine when they retire.
Yet, only 35 percent have saved in an IRA or met with a financial advisor.
Only 32 percent have calculated the income they would need for each year of their retirement. According to the Social Security Administration, a 65 year old male should save up for at least 18 years and a female at least 20 years to maintain full-time retirement during their golden years.
Only 12 percent have saved in a healthcare savings account –accounts much like personal savings accounts but used to save for future medical expenses.
While more than half say what they look forward to doing the most in retirement is the ability to do, “what they want, when they want”, the chances of that happening seem bleak.
- 45 percent fear not having money to cover monthly expenses
- 35 percent are anxious about healthcare costs
- 35 percent worry about inflation
- 32 percent fear outliving their money
As a result, many consumers are trying to play catch up. Many Boomers may postpone retirement and stay in the workforce longer; they plan to watch what they’re spending and cut entertainment and other luxuries. Some may even downgrade their housing to something less costly.
What you can do
The mistakes of these pre-retirees are lessons for those who aren’t there yet. Bottom line –prepare for retirement early so you can enjoy your golden years.
- Take advantage of your employer’s 401(k) or sign up for a Roth IRA on your own. The sooner you start contributing to them the better prepared you will be for retirement. If you can afford it, match what they’re offering as closely as possible to get the full employer match benefits.
- Contribute to a healthcare plan. Healthcare is costly and you certainly do not want to worry about depleting your savings to cover medical costs.
- Calculate how much money you will need for each year in retirement and start saving now. If you plan to retire at 65, men need to save for at least 18 years in retirement and women should save up for a minimum of 20 based on lifespan estimates.
- Aspire to retire debt-free by your target retirement age. Pay down credit card debt as quickly as possible. You should also take steps to pay off your mortgage, if you haven’t done so already. This ensures you own your home outright.
- Think carefully about how you want to spend your golden years and devise a plan. This can help you achieve your goals without having to stay in the workforce longer to make them happen.
- Revise your budget to include saving for retirement. This will help prevent overspending or spending on wants rather than needs. If you do not have a budget creating one is critical.
- When possible, save at least 10 percent of your salary. Saving more whenever possible is ideal, but commit to saving what you can (even if it’s only 5% or less) and build from there.
- Invest as much as you can to keep money coming in throughout your retirement years. Make sure to have a good mix of investments, both high and low risk, so all of your retirement money isn’t in things like risky stock options.
Of course, if you’re close to retirement and facing high debt payments, retirement planning can be even more stressful. If you’re feeling anxious and need some guidance, dial 1-888-294-3130 to speak to one of Consolidated Credit’s certified credit counselors. Or, to find out how much debt you’re in and learn your best options for getting out take our free Debt and Budget Analysis online.