It’s never too soon to start saving for your retirement. However, people who fall in the 55-to-64 age range are acutely aware of its importance, since the thought of retiring is on their mind. This age range represents a critical period in which it is important to get a realistic assessment of how financially prepared you are for retirement.
First thing’s first, it’s important to seek help from a fiduciary who specializes in retirement, especially if you feel overwhelmed. There are so many moving parts, that having an expert there to help you along the way can help you identify variables that you may not have considered.
First, you have to assess whether you’re ready
Assessing your financial readiness will help you determine if you have a projected shortfall or if you need to modify your retirement strategies, goals and objectives. To do this, you’ll want to gather the following:
- Checking and saving’s account balances
- Your income tax rate
- Average rate of return on savings
- Information about your current income
- Amount of income you project you’ll need during retirement**
**If you have a defined-benefit plan, your plan administrator or employer should be able to give you your projected income from your pension.
Having this projection can help you identify if you have a shortage in your retirement savings. This can help you identify how soon you plan to retire and the lifestyle you hope to pursue. If you find that you’re behind in your savings, don’t panic, you just may need to make some changes to your financial planning.
Some of these changes may include:
- Cutting back on everyday expenses where possible
- Get a second job
- Increase the amount that you add to your retirement savings
- Increase your retirement contributions
- Consider whether you will need to modify your retirement lifestyle
- Revise your budget to see if you can do without some of the nice-to-haves and just leave your must-haves.
Second, Re-Assess Your Portfolio
It’s important to make sure that your asset allocation model includes a mixture of investment strategies with varying level of risk. You’ll want to be cautious, but not to the point of losing out on some opportunities that could help you reach your financial goals sooner.
At this stage, working with a financial planner can help you minimize risk and maximize return more than you would if you had started earlier.
It also doesn’t hurt to get a second opinion. If you feel you have a portfolio that could be better, getting a second set of eyes on it can really help you identify some areas for improvement.
With how volatile the market is at this moment, it is important to understand the investment philosophy and strategy that you are implementing.
Lastly, Pay Off Any High-Interest Debts
Having high-interest debt can have a negative impact on your ability to save. The amount you pay in interest from these debts reduces the amount of money you have available to put towards your retirement.
Don’t fall back into the cycle once you pay it off. If you feel tempted, close out those accounts if they won’t impact your credit rating. If you have the discipline, you can store the cards away in a drawer. Only use them for small purchases a couple times a year to keep them active.
The Bottom Line
It’s never too late to start saving for your retirement. However, the longer you wait, the harder it becomes to reach your goals. Ensure that your retirement savings plan is on track. One final tip from Mach 1 Financial is to save more than you are projected to need. This can help you cover any unexpected expenses.