5 Steps to Fix Your Battered Retirement Plan
It’s no secret that a majority of Americans are ill-prepared for retirement. Here are some great tips to help you get started:
1. Pay yourself first. Set up an account that is not easy for you to access and start filling it with a significant percentage of your pay (10% or above). You can accomplish this by participating in your company’s 401(k) plan and making sure you contribute at least the minimum amount to get the employer match (free money!).
2. Load up on tax breaks. Another benefit of participating in a 401(k) is that it lowers your taxes without you having to do all the paperwork. A 401(k) is also portable if you change jobs.
3. Estimate your retirement needs. Don’t believe that you will be able to sustain your current lifestyle on Social Security alone; it won’t happen. Experts say you need to have enough saved to match at least 70% of your pre-retirement income. Not sure how you will get there? A financial advisor can help advise you on strategies, depending on your current age, income and estimated retirement age.
4. Plan conservatively. Don’t think you can count on a bull market to fund your retirement. Estimate a reasonable return on your investments when planning your retirement, and balance risk and reward as you near your retirement date.
5. Take charge. You need to take charge of your retirement plan by checking regularly to see if you’re on track to retire with the amount of income you need to support the lifestyle you want. Know exactly how your plan is – or is not—working and adjust accordingly by considering how you can create an income stream for yourself that you can count on throughout the rest of your life, instead of relying on savings or your retirement account at all.