KEY POINTS
- Even if retirement is imminent, there are measures you can implement to gear up for it.
- Consider pursuing some form of post-retirement work—aim to find a part-time role that brings you satisfaction.
- For budgeting, the critical factor is how much you require to maintain a comfortable lifestyle.
If the thought of retirement elicits both excitement and anxiety, you’re not alone in that sentiment. A recent Gallup survey revealed that only 43% of employed adults anticipate being able to afford a comfortable retirement. Conversely, when Gallup inquired with actual retirees, 79% reported having sufficient savings to live comfortably. This indicates that, for some, there exists a significant gap between their apprehensions and the reality.
The most effective method to overcome any fear is to confront it directly. Here’s how you can approach it:
Contents
Evaluate Your Finances
If you haven’t meticulously tracked your personal finances, the anxiety surrounding retirement might stem from uncertainty about how much more you need to save and invest. You can gain clarity by following these steps:
Draft an Estimated Retirement Budget
Begin by reviewing your current household budget to identify which expenses will continue and which will be eliminated before retirement. For instance, if you have a mortgage that extends into retirement, include that along with regular expenses like utilities and groceries. Exclude any debts that will be settled by the time you retire.
Summarize All Anticipated Income Sources
This encompasses personal savings, retirement accounts, pensions, Social Security, annuities, rental income, and any other funds you anticipate receiving. If you’re eligible for Social Security but uncertain about the amount, create an account on My Social Security.
My Social Security provides access to various details, including potential Social Security payments at different ages. Once you have aggregated your expected income, compare it against your estimated retirement budget.
Next Steps
With this financial overview, you should have a clearer understanding of your situation. Suppose you anticipate a monthly income of $3,000 (post-tax), yet your retirement budget estimates closer to $4,000 per month. The first task is to identify ways to bridge that $1,000 shortfall. This might involve increasing contributions to a retirement account, reducing costs by clearing debts, generating a new income stream, or a mix of these strategies.
While understanding your financial standing may not completely alleviate retirement fears, it provides you with tangible goals to work towards.
Determine if Continuing to Work is Right for You
According to CBS News, around 20% of individuals over 65 remain employed. For many, staying in the workforce is essential for financial stability. For others, it’s about keeping mentally active, engaging socially, and adhering to a routine. It’s about what suits you best.
If retirement is approaching and you’re not fully prepared, contemplate whether a part-time job could bridge the gap. If continuing to work post-retirement doesn’t appeal to you, concentrate on enhancing your retirement savings now. Here are some suggestions to help you begin:
Eliminate unnecessary expenses from your current budget and save the difference. This might include subscription services, dining out, and high-interest loans and credit card payments.
Decide where you’ll reside post-retirement. If you’re currently in a high-cost living area, consider relocating to more affordable regions domestically or internationally.
If your health permits, consider taking on a side hustle and allocate the earnings to your retirement fund. This could be something enjoyable, like tutoring or pet sitting.
Adapt to Market Uncertainty
If a significant portion of your savings is invested, concerns may arise about how your nest egg will endure a bear market. Here’s the reality: the stock market will experience fluctuations. It always has. These natural ups and downs can be daunting.
As with tidal movements, stock market fluctuations are a natural occurrence. You can prepare for bear markets by maintaining sufficient cash reserves to draw from during downturns. This allows your investments to seize low-cost stock opportunities and appreciate during the next bull market.
Although risks are unavoidable, you can mitigate them by diversifying your investment portfolio. For instance, if you’re optimistic about tech stocks, feel free to invest but avoid concentrating all your resources in one sector. A balanced portfolio allows for sectoral downturns without catastrophic impact.
The crux is this: If retirement finance concerns are overwhelming, take proactive steps to regain control in the time remaining before retirement. By focusing on progressing in the right direction, you’ll reduce your worries about potential pitfalls.
