When you think about retirement, do you become anxious or tense? Does your heart race or your breathing increase? Do you lie awake at night lost in an endless cycle of “What ifs?” or “Should Is?”
If so, I’m with you—and we’re not alone! Eighty percent of Americans don’t believe Social Security will meet their retirement income needs,1 and 57 percent worry about outliving their retirement savings.2 That’s definitely anxiety-producing.
Combine this with the fact that about one in three Americans have less than $5,000 in retirement savings and one in five have no retirement savings at all,3 and you begin to see why the “retirement income gap” that many of us will face in the decades ahead is weighing heavily on people of all ages.
No wonder more than half of American workers over the age of 60 are delaying retirement, with two in five workers expecting they’ll not be able to retire until after their 70th birthdays (at the earliest).4
Yet many of us, rather than getting serious about retirement planning, are burying our heads (and future hopes and dreams) in the sand. Are you?
"Many of us, rather than getting serious about retirement planning, are burying our heads (and future hopes and dreams) in the sand. Are you?"
If so, here are five steps to help you achieve retirement peace of mind and enjoy a better night’s sleep:
Step 1: Set specific goals. As anyone who knows me will tell you, I’m a big believer in setting both life and financial goals and have been doing so since my early 20s when goals such as leaving college with minimal debt, buying a house and starting my own business kept me focused on growing my savings. Now, very specific retirement goals are what drive me and many others my age to save.
As I explain in The Magic Amount to Save for Retirement, the size of the nest egg you’ll need will depend on the size—and cost—of your goals. While I encourage you to set big goals and be optimistic about your ability to achieve them, don’t be so pie-in-the-sky that you set yourself up for failure.
Step 2: Establish a budget. While many people consider “budget” a four-letter word, I view my budget as an invaluable “peace of mind” money management tool for getting from where I’m at today to where I want to be.
Getting started is easy. With your specific goals in mind, simply plan and track your monthly income (e.g., wages, child support, investment income) and your monthly expenses (e.g., mortgage payment, car payment, utility bills). If your income routinely exceeds your expenses, you’re living within your means. If not, you probably want to curtail your spending so that you’re able to create a bigger nest egg for your retirement goals.
Step 3: Pay off debt. If you’re able, pay off all high-rate credit-card debt before you retire. Also do what you can to reduce or eliminate all other debt, including your mortgage and any car loans.
Step 4: Save for upcoming expenses. Many of your day-to-day expenses will carry over into retirement, but you’re likely to also have some new ones. Medical expenses and long-term care costs are two to keep in mind. Perhaps you, like many people, will also have added expenses associated with travel, a second home or new hobbies.
On the other hand, you may be planning to downsize which could free up home equity that you can use to pay for these increased expenses. Thinking through these changes and how they’ll affect your lifestyle and financial needs now will make it easier for you to be prepared for—and excited about—what lies ahead.
Step 5: Find out what you can expect from Social Security. I’m still several years away from retiring but have already attended several webinars explaining the ins and outs of Social Security. I’ve also visited my local Social Security office to better understand how the decisions I make today will impact how much money I receive from Social Security in the years ahead. Having done so, I now feel more confident that the plan I’ve made is a realistic one. And that knowledge alone has been a valuable addition to my retirement peace of mind—one that didn’t take much time or effort on my part.
In the process, I also learned what many Americans already know: the importance of augmenting Social Security income with some income-producing assets. Quality stocks that pay dividends fall into this category. So do annuities.*
Designed specifically for retirement purposes, an annuity is a contract with an insurance company that provides a monthly retirement “paycheck” that can last for as long as you live. You can use this income to supplement what you receive from Social Security.
Why is such supplemental income so important? Because one thing is clear: Social Security won’t meet most people’s financial needs. The average payout is only around $16,000 per year, which—if relied on as our sole source of income—will put us barely above the poverty line.5
So, if you’re looking to augment your Social Security income and enjoy retirement peace of mind, you may want to consider protected lifetime income. Learn more at retirereassured.com.
*What is an annuity?
Annuities are long-term, tax-deferred investments designed for retirement, involve risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½.
The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.