How to Avoid Setbacks That Could Derail Your Retirement

8:14 pm Retirement Planning

retirement sign e1367526898975 How to Avoid Setbacks That Could Derail Your RetirementAccording to a new Ameriprise Financial survey of Americans aged 50-70, a majority has experienced at least one major setback that threatened their ability to retire.  The average amount lost was $117,000.  A recent Kiplinger article provides information on avoiding these 6 common setbacks:

Not saving enough.  The average employee contribution to a 401(k) is 6-8% of salary; to maintain your current lifestyle in retirement, you should be contributing at least 15%.  Experts suggest you try contributing that much for three months; if that impacts your life too much, then dial it back – but keep it in the double-digit range.

Procrastination.  Starting out late is common, but it doesn’t have to delay retirement forever.  If you are 55 and have nothing saved, you will need to contribute a big chunk of your income to your 401(k) each year.  For example, if you are making $80,000 a year, do all you can to contribute at least $23,000 to your plan for the next 10 years.  With a typical employer match and investment earnings, you could wind up with almost $500,000 by the time you are 65.

Not investing in stocks.  The stock market makes lots of people nervous, but financial experts say that by the time you are nearing retirement, your investments should still be half in stocks.  Consider using dollar-cost averaging – where you invest in stocks or stock mutual funds in set amounts on a regular basis – to help ride out market fluctuations.

Paying for college.  Almost two-thirds of parents rob their retirement savings to pay for their children’s college education, but experts say this is a disaster in the making.  Instead, be realistic with your children about what you can afford to contribute and seek out other sources of funding.

No emergency reserve.  If you lose your job and don’t have an emergency fund, you are much more likely to drain your retirement savings to pay for current living expenses.  You should put aside an emergency fund of at least six months’ worth of living expenses – a year is even better.

Losing a spouse.  If you are married and count on both incomes, each spouse needs a life insurance policy to cover the gap if one spouse dies.  If you are entitled to a pension, be sure to choose the survivor’s benefit option.  The higher earning spouse should also put off taking Social Security until age 70 so the surviving spouse can earn a higher benefit.

For additional help with retirement planning strategies, contact our Newport Beach law firm.

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