If you occasionally daydream about a time you won’t have to battle rush-hour commutes to get to an office every day, you aren’t alone. But are you setting yourself up for a successful retirement? Even if you’re participating in a 401(k) or investing in the stock market, you may not be fully prepared to retire when the time comes.
Although there’s no shortage of tips on how to save for retirement, often they spend more time focusing on the logistics of saving and investing, rather than the realities of the retirement picture for today’s workers. Here are a few facts you may not know about your retirement savings.
You Need More Than You Think
Nearly one-quarter of Americans have less than $10,000 set aside for retirement. Studies show that overall, Americans are $6.6 trillion short of what they need to retire comfortably. With 165 million workers covered by social security, this adds up to a shortfall of $40,000 per worker. Even worse, one-third of Americans have no retirement savings at all. Even if you’re in the minority of consumers who are well prepared, it may still not be enough — especially with rising healthcare costs. Many people subscribe to the four-percent rule, which states that you need to be able to withdraw four percent of your nest egg each year of retirement to meet your expenses. Although this can vary due to inflation and other factors, it’s a good rule of thumb as you plan ahead. It’s important to be honest about what your monthly expenses will be and make sure you’ll have enough saved so your projected annual expenses only require four percent of what you’ve saved.
You May Not Want to Retire
If you’re worried you won’t have enough money to stop working completely at 65, there are other options to consider. Many people find they don’t like a life of 24/7 leisure, instead opting to work part-time or freelance for something to do. According to an AARP study, 70 percent of experienced workers plan to work either full or part time after retiring, and 35 percent of respondents cite extra income as the reason why. This income could be enough to supplement your retirement savings, as well as any social security payments you get each month.
You Likely Won’t Travel — Unless You Plan For It
Most people add “travel” to their list of goals for post-retirement life, but that often isn’t the reality. One study found that retirees spend the majority of their time on activities like sleeping and watching TV, with travel not even making the list. For those who want to travel but don’t, poor health or lack of proper funds could play a role. If global travel is your dream, you may want to fit more traveling into your schedule while you’re still working, or put proper plans in place (like setting aside money specifically for traveling) to avoid roadblocks.
Your Home Is Part of Your Savings
As you’re scrambling to meet monthly retirement savings goals, don’t discount the value of the home you’ll own when you retire. If you have equity in that home, that could provide a substantial boost to your retired life, especially if it allows you to live mortgage-free during your golden years. However, if you have the extra savings, experts often recommend keeping a mortgage, especially if the payments are low. Before making the jump to retirement, make sure your mortgage is at an affordable rate,refinancing if necessary to make your payments more manageable. Most importantly, always participate fully in your long term financial planning so that you’ll remain in charge of what is happening with your investment money.
It may seem as though you have plenty of time to save for retirement, but the years will pass more quickly than you expect. Regularly audit the amount you have saved to make sure you are on the right track. Not only will this keep you comfortable in your later years, but it will also give you peace of mind today.