Is retirement approaching? Worried that you won’t have enough money? You have company. According to a recent study from the Transamerica Center for Retirement Studies, baby boomers have a median retirement savings balance of only $147,000.1 While that number may represent a good start, it’s unlikely to be sufficient to fund a long retirement.
Baby boomers face a number of unprecedented retirement challenges. Many don’t have pensions, which means they have to shoulder the burden of funding their expenses in retirement. Retirees also have to contend with a longer life span, which means they need to cover more years of spending. Health care is also a substantial area of expense.
Fortunately, it’s never too late to correct course. With careful planning and quick action, you can retake control of your retirement. Below are three steps you may want to consider. A financial professional can help you analyze your needs and implement the best course of action.
According to a recent Gallup study, retirement is America’s top financial worry. The study found that more than 50 percent of Americans are concerned that they won’t be able to fund their retirement.1
It’s easy to fall behind on your retirement planning. If you’re like many Americans, you have other financial challenges that may seem more pressing. Perhaps you’re struggling with debt. Maybe you’re paying for your child’s education. When you add up your normal expenses, it may be difficult to find additional funds to put toward retirement.
Fortunately, it’s never too late to correct course and get back on track. Below are a few warning signs that you aren’t as prepared as you should be. If any of these sound familiar, it may be time to develop a new strategy. A financial professional can also help you implement a retirement strategy.
Do you lack a succession plan for your small business? Don’t worry. You have company. A small-business survey from Nationwide found that half of respondents said they don’t have a succession plan. Among those without a plan, 47 percent said they didn’t think such a plan was necessary. An additional 22 percent said they didn’t have time or know how to proceed, while 11 percent said they didn’t have time.1
If you’re not nearing retirement, a succession plan may not seem like an urgent priority. However, a sound succession plan can be an important tool for any business owner, no matter your age. Your succession plan can help you make strategic long-term decisions so you can capture maximum value when it finally is time to exit your business. It can also protect your business and your family in the event of an emergency.
Not sure how to begin your succession planning? Below are a few tips to get you started. You’ve worked too hard to build your business to not fully benefit from its value when it comes time to exit.
The 2017 Insurance Barometer Study by Life Happens found that only 60 percent of respondents agreed that single parents of young children need life insurance. On the other hand, 82 percent of respondents said married couples with young children need life insurance protection.1
The difference in the survey results is confounding because single parents are often in greater need of life insurance protection than couples are. A single parent could be a child’s primary or even sole caretaker. If a single parent passes away, the child may have little financial support.
Life insurance minimizes that risk. The death benefit can be used to provide care and financial security for a child. If you’re a single parent without life insurance, now may be the time to examine your options. Below are a few tips to help you get started. Your financial professional can help you determine the correct amount and type of life insurance for your needs.
Do you have a strategy to pay for health care in retirement? Medicare will cover many of your expenses, but it won’t cover everything. You’ll still face premiums, copays, deductibles and other costs. According to a study by Fidelity, the average married couple will pay $275,000 for out-of-pocket medical expenses in retirement. That figure doesn’t even include the cost of long-term care.1
As you get older, it’s possible that you may become more vulnerable to injury and illness. In the later years of retirement, copays for prescription drugs and medical treatment may eat up a big chunk of your monthly income. You could require treatments and services that aren’t covered by Medicare at all, such as dental, vision or physical therapy.
Approaching retirement soon? If so, you’re probably thinking about income—specifically, where your income will come from in retirement. You’ll probably draw income from multiple sources, including Social Security, retirement account distributions and possibly even a pension.
While Social Security is helpful, it usually isn’t sufficient to fund a comfortable retirement. That’s why many retirees also rely on withdrawals from their savings and investments. Unfortunately, that income usually isn’t guaranteed. A market downturn could impact your income. Or you could deplete your assets if you live longer than expected.
Thinking about when you should file for Social Security benefits? It’s an important decision, because it’s permanent. Once you start receiving benefits, you can’t change your mind. If you file early, you’re likely to see reduced benefit amounts. Similarly, if you delay your filing, your benefit amount will be increased.
You’re eligible to file as early as age 62. However, your benefit is permanently reduced if you file at any point before your full retirement age (FRA). Most people reach their FRA between their 66th and 67th birthdays.1
However, you can wait past your FRA to file for benefits. In fact, you can delay your filing as late as age 70. For each year you wait past your FRA, your benefit amount increases 8 percent. Conversely, your amount could be reduced as much as 25 percent if you file before your FRA.1
Do you own an IRA? If so, you have company. According to a 2013 study, Americans hold nearly $2.5 trillion worth of assets inside IRA accounts.1 Much of those assets are held in traditional IRAs.
Traditional IRAs, 401(k) plans and similar qualified accounts are popular savings tools because of their tax-favored treatment. You can fund these accounts with pretax dollars. Also, your growth is tax-deferred as long as the funds stay in the account. You can’t avoid taxes on these dollars forever, though.
You can defer distributions from your IRA or 401(k) up to age 70½. At that age, however, you must begin taking required minimum distributions, also known as RMDs. The amount of your RMD is based on several factors, primarily your age and your end-of-year account balance. Generally, your withdrawal will increase relative to your balance as you get older.
A budget can be one of your most valuable financial tools as you plan your retirement. Your budget can help you plan your required income and make smart buying decisions. Unfortunately, most Americans don’t use a budget. According to a study from U.S. Bank, only 41 percent of American households rely on a budget to guide their spending.1
Even if you don’t use one today, there’s nothing saying you can’t change that habit in retirement. However, you may find it difficult to project your future expenses. After all, you can’t predict the future. You can, though, use your current expenses and your plans for retirement to develop an accurate estimate of your anticipated spending.
Since its inception nearly 40 years ago, the 401(k) has become one of the most commonly used retirement savings vehicles. It’s popular with employers because it relieves them of the burden of funding a pension. The 401(k) plan is popular with employees because it usually offers a broad range of investment options, tax-deferred growth and employer matching contributions.
While a 401(k) can be a powerful retirement accumulation tool, it can also be complex to manage, especially after you’ve left your employer. Many workers leave their 401(k) balances in their former employer’s plan after they leave. They may feel that’s their best option, or they may forget about the balance altogether.
However, many employers have decided they aren’t going to keep former employee balances in the plan forever. Many companies have adopted a policy known as “forced rollover.” Under a forced rollover, your balance is automatically rolled out of the plan and into an IRA. Most plans only enforce this type of rollover for balances under a certain threshold.