Those planning for retirement are always struggling to find ways to improve the odds of not outliving their retirement resources. Longevity is the number one problem of those faced with an approaching retirement. With the uncertainty of the stock and bond markets, the probability of rising income taxes and the all too evident rise in inflationary pressures, this can make planning for your retirement a tricky affair.
To overcome these pressures on your retirement assets, there are three you can do to improve your retirement savings. These are:
- Work longer
- Save more for retirement each year
- Invest more aggressively or intelligently
Working Longer
Working longer is the obvious choice for most Americans. According to a recent EBRI survey, 53% of U.S. workers have saved less than $25,000 for retirement. So it seems many Americans will be working
much longer than their forefathers.
The good news is that working longer can significantly increase your savings, Social Security benefits, and pension values. The downside of course is that you may have less time to spend these benefits.
As an example, the simple act of deferring your retirement from 67 (the standard retirement age for Social Security benefits) to 70 years of age can increase your annual benefits by 20% or more.
Saving More for Retirement Each Year
Again this is fairly obvious, but if you save more each year, you will have more in retirement. According to Henry K. Hebeler author of Your Winning Retirement Plan, “When people really come face-to-face with how little they will get in retirement, they become highly motivated to save more. I’ve seen people increase savings to the point where they are saving one-half of their take home pay. Most of us would have trouble doing this, but when the reality of living off Social Security alone sets in, people really become interested in saving.”
We think it is worth noting that Social Security is no given either in an age of runaway government spending and deficits. This entitlement will likely be reshaped in the years to come.
Invest More Aggressively or Intelligently
Investment rewards are generally a function of the amount of risk you are willing to take in the markets. If you are behind in your retirement saving, you may be forced to take more investment risk to reach your retirement goals.
We use the work “intelligently” because it’s fine to be more aggressive, but sometimes just thinking outside the box will get you there too. As an example, many of our investment solutions are not highly correlated (meaning they zig when others zag) to more traditional investment strategies. By combining traditional “buy and hold” and non-traditional strategies, such as our solutions, you can get higher returns, smoother returns and greater peace of mind without necessarily taking great investment risk.
The bottom line is that many of us are behind where we need to be to achieve our ideal retirement. These three options can help you balance the tricky job of trying to put aside the right resources to support you in your retirement.
It is often joked in the estate planning process that “if you can tell me the exact date you will die, we can come up with a plan that will allow you to die broke.” Well in all seriousness, longevity and the uncertainty of life is one the greatest stumbling blocks to planning one’s retirement as well. We hope these three options will help you in your planning.
