If you're feeling insecure about your retirement readiness, you're definitely not alone; our retirement plan advisors often tackle questions about how much is enough. In fact, recent studies indicate that American's #1 retirement-related fear is not saving enough to ensure financial freedom during the retirement years.
Understandably, these fears grow more pronounced as retirement approaches; 75 percent of those surveyed indicated that they worry about inadequate savings. Many Americans in their 50s and 60s find themselves playing catch-up as retirement looms ever closer on the horizon. These tips can help you shore up your retirement savings and offer peace of mind.
Catch-Up Advice from Retirement Plan Advisors: By the Numbers
In the aftermath of the recession, many are stuck in the same boat, playing catch-up on depleted retirement accounts. A 2013 study from the Pew Charitable Trust found that the so-called "early boomer" generation, or those born between 1946 and 1955, are the last generation actually on track to retire with enough savings to support their lifestyle.
In contrast, "late boomers" lost between 25 and 28 percent of their net worth during the recession, while Generation Xers lost 45 percent of their wealth, further damaging a demographic that didn't have a significant amount of savings to start with. Making matters worse, replacement rates have declined over the last five years, placing younger cohorts on shaky financial ground. Gen-Xers are predicted to replace only about half their pre-recession savings in time for retirement, while late boomers are on track to replace about 60 percent.
Focus Financial Strategies on Saving
Retirement plan advisors recommend focusing on saving. Even if your income has dropped dramatically, saving as much as you can is key. While you may not be able to get back up to pre-recession levels for a while, it's essential to do what you can. Maximize savings by contributing as much as you can to qualified retirement accounts, like a 401(k) or a Roth IRAs.
To aid in your savings efforts, ensure that your lifestyle reflects your income. The further behind your goals, the bigger the changes have to be. Make that used car work for a few more years and avoid a high payment. Sell that big house and move to a cheaper area.
Embrace economy where you can. Little changes -- such as cooking dinner at home instead of eating out, then taking leftovers to work for lunch the next day -- add up over time. Do you really need that $5 latte or will a cup of drip coffee from the break-room suffice? Can you download that new novel from the library for free?
If you're helping your adult children, cut back. Of course you want to help, but able-bodied adult children have a long time to build up their own retirement savings -- and you don't. If you're still subsidizing their lifestyle, now's the time to stop and put that money into retirement savings.
Add Delay to Your Comprehensive Financial Plan
Delaying certain milestones, such as retirement and drawing Social Security, will give you more time to build your savings. Plan on working longer, whether that means not taking early retirement, working after retirement age, or semi-retiring, i.e. working part-time into retirement.
On a similar note, wait as long as you can to draw Social Security. Up until age 70, your payments grow for each year that you delay -- and the difference can be significant. For instance, a $1,630 payout at age 62 grows to $2,200 at full retirement age, and increases to $2,860 at age 70.
Review Your Strategic Financial Planning Process
Finally, sit down with your retirement investment advisor and review your situation. Is your money invested in the appropriate vehicles for your particular situation? Your wealth advisor will run the numbers and help you determine which risk level is right for you.