Americans with retirement on the horizon are worried.
A recent AARP survey found that 20 percent of adults 50-plus have no money saved for retirement and 61 percent are concerned they will not have enough money to support themselves during their so-called golden years. Add unexpected injuries, illnesses, divorces and deaths to the mix and it’s easy to see why preretirees are losing sleep.
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But you don’t have to stress. You can learn from the mistakes made by those who came before you and avoid the same pitfalls. “Over the past five years, I’ve heard the same sage wisdom: if only I knew then what I know now,” says Pam Krueger, founder and CEO of Wealthramp, an online service that matches investors with financial advisers. The top do-overs include the following six:
1. Not saving enough
The rule of thumb is you’ll need 80 percent of your working income in retirement to maintain your lifestyle, but it’s not cut-and-dried. Many variables, such as working longer or an illness, can move the amount up or down. Regardless, not saving as much as possible is a big retirement regret for many. “Life events kept them from saving, and now those decisions made back in their 40s, 50s and even as early as 30s are really biting them,” says Kevin Chancellor, CEO of Black Lab Financial. “It’s making it hard for them to live a good quality life with the cost of things so much higher.”
Among retirement savers polled by AARP, just 36 percent expect to have enough money to be financially secure in retirement if they continue to save at their current rate. Many respondents are in the 50-plus category, underscoring the need to save early and often.
How to prevent it:
Determine how much money you think you’ll need each month in retirement, making sure to include potential and unexpected injuries and illnesses. If you fear you’ll have a shortfall, there are ways to shore up more cash. You can increase your contributions to a company-sponsored retirement savings account, delay your retirement for a few more years, get a part-time job, sell your used goods and look for ways to reduce your spending.AARP’s retirement calculator can help you determine if you are saving enough.
2. Avoiding the stock market
The stock market can seem scary and volatile, but avoiding it can hurt your savings goals. Over the long haul, people with a diversified portfolio of stocks and bonds have historically saved more than those who keep it stashed in a bank account or under the mattress. Even in bad times, having stock exposure has paid off. Take the Great Recession of 2007 to 2009 for one example. Five years after the market tanked, investors who stayed the course had recouped their losses and then some. The same goes for the pandemic. Stocks rebounded after falling more than 30 percent.
