1. Set realistic goals.
2. Call in the experts.
3. Take advantage of catch-up contributions.
4. Time your exit.
5. Tackle debt.
6. Prepare for the unexpected.
If you’re among the roughly six out of 10 individuals who has never tried to calculate what they need in retirement, do it pronto. That figure is like a destination on a map, giving you direction as you save, invest and create your overall financial plan.
1. Set realistic goals
First item for consideration: Your savings and investments thus far. Hopefully, you’ve been stashing funds away consistently, making maximum contributions to things like 401(k) plans and other accounts. These days, individuals 55 and older are on track to replace roughly 55 percent of their income during retirement with personal savings, Social Security and pension income. That means they’ll have to live on 45 percent less cash each month once they retire.
How much is enough? That depends on your lifestyle and expenses, potential medical bills and the kind of support you’ll have from, say, a pension plan and Social Security.
2. Call in the experts
With that in mind, it may be a good idea to seek a little professional guidance to ensure you’re setting realistic goals.
3. Take advantage of catch-up contributions
One of the first things a pro will encourage you to do is to keep saving. If you’re still working and over 50, there are ways to catch up. But you’re going to need growth in your portfolio.
4. Time your exit
Savings and investments alone may not be enough to adequately fund your retirement. Planning also means making some vital life decisions, too. There’s a whole new need for people to work longer. People find they didn’t save enough. Work is a fundamental and new part of retirement.
5. Tackle debt
Part of the equation when you quit work is lingering debt.
6. Prepare for the unexpected
Safeguard your finances against unexpected medical costs, even if you’re certain you’ll be insured as a retiree. Many companies are scaling back lifetime health coverage for former employees. This year, 10 percent of companies expect to eliminate subsidized medical coverage for employees who would have been eligible.That leaves you vulnerable to some hefty medical bills that can quickly eat up a lifetime of savings. One option is long-term health insurance, which pays for extended medical care including such things as nursing and assisted living.
Retirement is like a two-edge sword you’re looking over your shoulder, concerned that something drastic could happen to you or to your partner, and you could be financially wiped out as a result. But, you’re also enjoying the freedom of doing what you want.