By John Drachman
According to the Insured Retirement Institute, only one in five investors surveyed said they will have enough money to last through their retirement years.
Will you be one of them?
Here’s a simple way to gauge your retirement readiness. Many financial planners suggest that, as a general rule of thumb, aim for a retirement strategy that can provide at least 70% of your pre-retirement income to meet future expenses.
If you need a few moves to make up for a potential retirement shortfall consider these seven action steps—and up your game.
Overcoming a Retirement Shortfall
- Keep Working Perhaps not the most desirable position on the retirement game board. Still, working allows you to contribute to your savings for a few more years. For example, working just three more years and saving 15% of earnings during that time could substantially increase one’s future income stream.
- Reduce Spending during Accumulation Years One of the best ways to save more is to spend less. Setting explicit goals, having a clear understanding of your net worth and carefully tracking expenses are essential to reducing spending. By modifying spending habits only slightly, you can uncover a significant source of money for your nest egg. This start-small savings principle, or “cappuccino factor,” can add up quickly if you get in the habit of redirecting dollars from discretionary purchases to long-term savings.
- Consider Combining an Accumulation Approach with an Income Strategy Think of a retirement plan as a two-part strategy that combines an accumulation phase with an income phase. By dedicating resources to growing your savings now, you better position your plan to provide a sustainable level of income later.
- Delay Receiving Social Security Try to refrain from receiving Social Security benefits until age 70 to qualify for a higher monthly payout. Such a delay can contribute to your future income stream significantly.
- Direct Savings to Tax-Advantaged Vehicles Reduce your tax liability and make the most of tax-deferred compounding.
- Temper the Impact of Market Risk on Your Savings Make sure your retirement strategy has a least some guarantees and provisions against market loss.
- Consider Meeting with a Financial Advisor Right-sizing your retirement strategy can be daunting. Fortunately, you don’t have to undertake this alone. Depending on your risk tolerance, a financial professional can develop a strategy designed to grow your assets to meet future income needs.
Finally, according to a survey from the life insurance trade association LIMRA, retirement-minded investors who opted to work with a financial pro reported they were twice as likely to feel they “were well-prepared” when compared to their retirement peers who elected a “go-it-alone” approach.
John Drachman is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.