Retirement On The Horizon? How To Make Sure You’re Financially Ready

61% of Americans 50 and older are worried they won’t have enough money for retirement. Only 21% of people have a retirement plan. Which is why a pressing question remains for many: ‘Have I saved enough for retirement?’

This question is especially critical for those approaching retirement who want to maintain a lifestyle they’ve worked hard to achieve. For wealthier individuals nearing retirement age, this question isn’t just about surviving—it’s about thriving. In this blog, we will explore the importance of retirement savings, the challenges that lie ahead, and actionable steps you can take to secure your financial future. Here’s what you need to know.

Understanding the Retirement Landscape

Retirement is a deeply personal journey shaped by your unique lifestyle, health, and financial commitments. While each person’s retirement dream will look different, one factor remains constant: your golden years could be at risk without sufficient savings.

According to this 2024 Planning and Progress study, Americans will need around $1.46 million to retire comfortably. This figure can be even greater for rising-cost areas like Connecticut and Colorado. For instance, as of July 2024, Zillow estimates the average home value in Connecticut to be around $411,971, up 9.7% over the past year, while in Colorado, the typical home value is about $550,511, up 1.4% over the past year.

Moreover, inflation gradually diminishes the value of your savings over time. According to recent Consumer Price Index (CPI) data, despite the smallest 12-month increase since March 2021, inflation has gradually been on the rise, with the U.S. annual rate reaching 3.2% in July 2024. If your retirement plan doesn’t account for inflation, you may find that your savings don’t go as far as you’d hoped.

The Impact of the Financial Crisis and Economic Uncertainty

Many Gen Xers are in the “sandwich generation,” juggling aging parents’ care while supporting their adult children. This dual responsibility significantly strains their finances, making it increasingly difficult to build adequate retirement savings. Alarmingly, nearly half of Gen Xers have saved less than $50,000 for retirement. This is far below the recommended goal of saving at least ten times your annual income by retirement.

Generation X has also weathered economic challenges from the 2007-2008 U.S. financial crisis and, more recently, the financial uncertainties triggered by the COVID-19 pandemic. These events have taken a toll on their ability to save for retirement. Many have been forced to dip into retirement funds to cover unexpected expenses or prioritize other financial obligations, such as paying off mortgages or funding their children’s education.

Given the complexity of these challenges, saving for retirement can feel overwhelming. However, by exploring some effective strategies, you can navigate these obstacles and work toward securing your financial future.

Are You Ready?

When planning for retirement, a common guideline is to save between 10% and 20% of your annual salary, which is generally considered sufficient to ensure a comfortable retirement. Another general principle suggests that you’ll need approximately 80% of your pre-retirement income to maintain your current lifestyle. However, if you envision a more extravagant retirement, your savings strategy should reflect that goal.

It can be valuable to assess your current savings using our free online retirement calculators and estimate how much you’ll need to live comfortably. This evaluation will help determine if you’re on the right track or if adjustments, such as reducing potential retirement expenses, are necessary.

Further Strategies To Help Boost Retirement Security

The earlier you start saving for retirement, the more peace of mind you’ll have. Knowing you have a solid plan to cover your retirement expenses allows you to enjoy your pre-retirement years without financial stress. Here are some strategies to help you save for retirement:

1. Maximize Your Retirement Contributions: One of the most effective ways to boost your retirement savings is to maximize your contributions to tax-advantaged retirement accounts, such as 401(k)s and IRAs. For 2024, the IRS allows individuals over 50 to contribute up to $30,000 to a 401(k) and $7,500 to an IRA. If you haven’t been contributing the maximum amount, now is the time to catch up.
2. Diversify Your Investment Portfolio: Diversification is key to managing risk and ensuring your retirement savings can withstand market volatility. Consider a mix of stocks, bonds, real estate, and other investment vehicles.
3. Consider Tax-Efficient Strategies: Taxes can significantly impact your retirement savings. Implementing tax-efficient strategies, such as Roth conversions or tax-loss harvesting, can help minimize your tax liability in retirement. It’s important to work with a fiduciary advisor who understands the complexities of tax planning and can guide you in making the best decisions for your situation.
4. Create a Retirement Spending Plan: A retirement spending plan helps you understand how much money you’ll need to cover your expenses and how long your savings will last. This plan should account for all your expected retirement expenses, including housing, healthcare, travel, and leisure activities. It should also factor in inflation and potential changes in your spending habits as you age.

Common Mistakes to Avoid

When it comes to retirement planning, even small missteps can have significant consequences for your financial future. Being aware of common mistakes that can derail your retirement goals during this important time is crucial. Here are some common pitfalls to avoid:

1. Procrastination: One of the biggest mistakes you can make is procrastinating on your retirement planning. The longer you wait, the harder it will be to catch up on your savings. Even if retirement feels distant, it’s crucial to start planning now.
2. Ignoring Inflation: As mentioned earlier, inflation can significantly erode your purchasing power over time. Failing to account for inflation in your retirement planning can result in your savings falling short of what you need to cover your expenses.
3. Not Seeking Professional Advice: Retirement planning is complex, and it’s easy to make mistakes if you’re unfamiliar with the intricacies of financial management. Working with a professional and experienced registered financial advisor can help you avoid costly errors and help ensure you’re on track to meet your retirement goals.

At Agemy Financial Strategies, our fiduciary advisors are committed to providing advice that is always in your best interest. We take a holistic approach, considering all aspects of your financial situation to help you achieve your envisioned retirement.

Final Thoughts

Having enough saved for retirement isn’t just about hitting a target number; it’s about crafting a financial plan that lets you live the retirement you’ve always envisioned. For wealthy individuals in Connecticut & Colorado, this means taking a comprehensive approach to retirement planning, considering all aspects of your financial situation, and working with professionals who can guide you through the process.

At Agemy Financial Strategies, we help clients navigate the complexities of retirement planning. Our team of fiduciary advisors is committed to providing personalized advice in your best interest. Whether you’re just starting to think about retirement or nearing the end of your career, we’re here to help you achieve your financial goals and help ensure a comfortable and fulfilling retirement.

Contact us today to schedule a consultation and discover how we can help you prepare for your golden years.