Is Your Retirement Built on a Solid Financial Foundation?
Are you just starting to save for retirement? Many Americans are woefully behind in saving for their future retirement. A recent study found that nearly a third of all Americans have no retirement savings at all. An additional 22 percent have less than $10,000 saved.1
The good news is you can get back on track and overcome your savings shortfall by developing a plan and taking action now! The start of the year is a great time to make a resolution to save more this year, and there are plenty of steps you can take to boost your savings. For example, you can cut back on your spending. You could plan to push your retirement to a later age. You could even work part time in retirement.
However, the most effective strategy may be to develop a foundation of solid financial habits throughout your working years. Retirement is a sizable financial challenge. It takes years of saving and preparation to achieve your goal and live your desired lifestyle after you’re done working. You can put yourself in a better position by taking action early. Below are three steps and lifelong financial habits to consider implementing sooner than later. Master these habits, and you’ll greatly improve your chances of funding a comfortable and enjoyable retirement.
1.) Invest in your ability to grow your income.
Investments play a role in any retirement strategy. However, the most valuable investment you may make is an investment in yourself. Your ability to earn income may be your most valuable financial asset. You can improve your ability to save for retirement by increasing your income throughout your career.
Consider ways to improve your skills and advance your career. For example, could you gain a promotion by advancing your education? Could you learn new skills to make yourself more attractive to employers? Or is it time to consider a career change so you can elevate your earnings?
Your earnings drive your ability to save. Of course, as your income increases, it’s important that you have a plan in place to allocate those additional funds to savings. If you simply spend the additional money, you won’t capture the benefit of your increased earnings.
2.) Minimize your exposure to risk.
Retirement planning is about accumulating assets, but it’s also about minimizing your exposure to risk. Any number of threats could derail your retirement plans. You could become disabled and have limited earning potential. You or your spouse could pass away unexpectedly, creating a financial crisis for the family. You could see a sizable downturn in the value of your investments. You might face a costly health care challenge that drains your savings.
Develop a retirement strategy that minimizes your exposure to these risks and others. Insurance is an effective risk management tool. You can use disability insurance to replace your income should you suffer a serious injury or illness. Life insurance can protect your family should you pass away. A financial professional can also help you find tools and strategies that reduce your exposure to market risk, while still growing your nest egg.
3.) Regularly review your plan and adjust as your needs change.
Life changes. When it does, your retirement strategy should change with it. Take time each year to review your strategy and see if it still aligns with your needs, goals and risks. For example, perhaps your family needs have changed. Maybe you suffered a career setback that changes your savings capacity. Or you may simply have a lower tolerance for risk as you draw closer to retirement.
Your financial professional can help you analyze your strategy and objectives and make the appropriate changes. For instance, they may suggest an annuity that protects you from downside loss. Or they could suggest a change to your savings strategy to maximize tax efficiency.
Ready to build your retirement strategy? Let’s talk about it! Contact us today for a FREE review of your financial plan. We can help you analyze your needs and implement a plan to help you achieve both your short and long-term financial goals.
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