The Road to Retirement: Are you Ready?
We’re all going to hit retirement age one day. For some, that time is nearer than you think. The years pass by so quickly, and before you know it you’ll be entering into your golden age. Before your retirement starts, you need to ask yourself - are you ready? Preparing for retirement now can help provide you with the financial cushion you’ll need to fund your lifestyle. Did you know the average Social Security retirement benefit is only $1,503 a month? Don’t let the costs of retirement take you by surprise. Here is a roadmap of questions you’ll need to help build a solid retirement strategy.
80% of Americans Admit to Not Knowing How to Plan for Retirement
If you're like the majority of Americans, you're probably not ready for retirement. Nearly half of all households headed by people 55 and older lack substantial retirement savings and nearly 30 percent of people in the same age group have nothing in the way of retirement savings. These numbers are even higher for younger Americans, highlighting the need for more Americans to set retirement planning goals.
Perhaps the most shocking finding is that roughly 80 percent of Americans don't really know how to plan for retirement. Understanding how retirement planning works is one of the most important life lessons you can learn. The process begins by determining how much money you will need to live comfortably during your retirement years.
How much money will you need during retirement?
"Experts estimate that you will need 70 to 90 percent of your pre retirement income to maintain your standard of living when you stop working." - United States Department of Labor
The road to retirement begins with a strong working knowledge of how much money you'll need to maintain your current standard of living. The United States Department of Labor estimates that most people will need between 70 and 90% of their preretirement income to achieve this goal. For instance, if you currently earn $60,000 per year, you will need between $3,500 and $4,500 per month during retirement. The exact amount of money you'll need will depend on a some key factors, including the following:
- Your housing situation: If you have paid off your mortgage or are living rent-free, you won't need to save quite as much.
- Your lifestyle: If you've always been a big spender, then you will need to ramp up your savings to continue your current lifestyle.
- Your health: If your health is compromised in any way, you will need to save more than the average person.
Another factor you need to consider is the location where you plan to spend your retirement. GoBankingRates compared annual retirement expenditures across every state to determine how much money residents of each state would need to retire. A summary of their findings shows that residents of some states like Mississippi, Oklahoma, and Arkansas can retire with under $700,000 USD while residents of New York, Oregon, California, and Hawaii would need over $1.3 million to retire.
Do you currently have a retirement plan?
Just over half of all Americans participate in a plan at work. If you're currently participating in a work-sponsored retirement plan, you're off to a good start. However, there are some things you can do to boost your savings. They include the following:
- Increase the percentage of your income you contribute to your 401K or other plan
- Max out your 401K contributions if you are financially able to do so
- Take advantage of catch up contributions if you are age 50 or older
- Contribute to an IRA if you are able to. Make sure you check to see if you're eligible for the $1,000 tax credit.
If you don't have access to a work-sponsored retirement plan, then it's even more important to contribute to an IRA and set aside a portion of your paycheck to retirement each month. A Certified Financial Planner can help you set up your own savings plan to ensure that you save the proper amount each pay period.
What steps can you take today if you're not on track?
Discovering that you're not ready for retirement can be unnerving. If you don't want to wait another minute to get serious about your retirement planning, there are some simple measures you can take right away to put yourself on track to achieving your retirement goals. Here are three steps you can take today to help make sure you are ready for retirement:
- Step One: Schedule a complimentary financial review with a Certified Financial Planner.
- Step Two: Map out a retirement budget that outlines how much you need to save each month in retirement.
- Step Three: Ramp up your 401K contributions and/or set aside some cash each month.
Scheduling a call with a financial planner is easy and you only need about 15 minutes to complete an initial financial review. And today's top planners can work with you to map out a retirement savings plan that is easy to follow and doesn't exhaust your budget.
We invite you to contact us at Park Place Financial to discover why residents across Houston turn to us for guidance with their retirement planning. Our Certified Financial Planners have the expertise and resources to help you transform your financial uncertainty into a well-crafted plan that reflects your individual retirement goals and current financial situation. We look forward to serving as your trusted Certified Financial Planners!