Americans are currently living longer and fuller lives. Advances in healthcare have extended lifespans and that is great news. The not-so- great news? Most Americans’ retirement plans are not setup to last the duration of their lives. While we look forward to living longer lives, we want them to be fulfilling and comfortable, not full of worry and struggle.
It takes a concerted amount of effort to ensure that you will be sitting pretty post-retirement. According to Market Watch, only a third of working Americans are saving money in an employer-sponsored or tax-deferred retirement account. And even those that are saving, aren’t saving enough. The average American couple only has $5,000 saved up, according to the Economic Policy Institute. But you don’t have to build a time machine and go back to your early years and promise to not spend your piggy bank savings. There are many ways to ensure that your retirement is as comfortable as you dreamed it would be.
Target Your Retirement Savings Plan
Start with a thorough review of your savings, your retirement income and your monthly expenses. That includes all 401K plans, IRAs, pensions, annuities and social security income. This will require you to also evaluate the type of retirement that you envision for yourself. You will spend much more money galivanting around the world than you will setting up in a small town near family. To ensure that you don’t spend your money faster than it is coming in, you will also need to consider what you expect your lifespan to be. While no one can predict the future, it is important to have a general idea so that you can plan your finances accordingly.
Continue to Budget
Once you have a plan, the rest of the process is dedicated to making sure that you stick to that plan. While it sounds simple, it can be rather challenging in practice. Estimating your monthly expenses is a huge part of figuring out what your savings and spending plan will be. But an even more important part is making sure that your spending actually coincides with your estimate each month. With unexpected expenses, it is easy to be thrown off track. And if you do not pay close attention, those birthday gifts, quick bites to eat and treat-yourself days can add up quickly.
Sometimes all it takes to get back on track is a budget cut the following month on non-essentials like entertainment or vacation expenses. But if that doesn’t do the trick, you may need to re-evaluate your plan. If you need to readjust after the first few months of budgeting, be sure that you take inflation into consideration when you plan for future expenses. You can also seek the help of a professional money management specialist to help you get the most out of your savings and retirement income. While strategies like taking out a reverse mortgage can help you if you are in a pinch, try to give yourself a clear path that relies on your set plan.
Give Yourself Performance Reviews
No matter how much you plan ahead, life has a way of sneaking up on you. And when it does, it does not simply ask you for five dollars to get a cup of coffee. It usually comes charging in demanding that you fork over thousands of dollars for an emergency that you could not possibly have foreseen. And while you cannot see the future to prevent that from happening, you can make sure that you continue to closely follow your plan and continuously re-evaluate to make sure that you are not missing any additional opportunities to save and spend your money wisely.
Just like you would receive yearly performance reviews at your job, you should be giving yourself performance reviews with your finances. You can decide whether it is annual, semi-annual or any other time frame that suits you. After you retire, your funds are limited. Whether you have annuities, a pension plan or other retirement accounts, there is a finite amount that you can assume. Because you take so much time to budget your spending from day to day, ensure that you are looking at the big picture as well. Each year, give yourself an overall plan and re-evaluate if your budget needs to shift with cost of living or unexpected expenses. Springing for the extra amount of effort it takes to double check the path you are on will give you the confidence you crave in your golden years. When you know how your money will last, you will feel much better giving yourself the much-deserved indulgence from time to time without worrying if it will set you back.