A few lessons from ‘Save for Retirement Week’
October 17, 2013
Congress has designated the third week in October as National Save for Retirement Week — which means it's a good time to think about your own retirement savings strategies.
Ensuring that you have enough money to support your chosen retirement lifestyle is certainly important.
Unfortunately, many of your fellow Americans have apparently not done enough in the way of building retirement savings to ease their minds.
Consider these figures, taken from the Employee Benefit Research Institute's 2013 Retirement Confidence Survey:
Forty-nine percent of those surveyed said they are not confident about being able to afford a comfortable retirement.
Just 46 percent of survey respondents say they and/or their spouse have even tried to calculate how much money they will need to live comfortably in retirement.
What steps can you take to gain confidence in your ability to retire in the manner you have envisioned? Here are a few suggestions:
Envision your retirement lifestyle. At what age do you want to retire? When you retire, do you plan to travel or stay close to home and pursue your hobbies? Will you do some part-time work or consulting? It's important to identify your retirement goals and then, as best as possible, estimate how much they will cost. Once you know what your retirement goals look like, you'll be able to shape a strategy for achieving them.
Contribute as much as you can afford to your retirement accounts. No matter what your retirement goals may be, you'll help yourself by contributing as much as you can possibly afford to your IRA and your 401(k) or other employer-sponsored retirement plan. (At a minimum, put enough into your 401(k) to earn your employer's matching contribution, if one is offered.) And if you reach the point where you can "max out" on these plans, look for other tax-advantaged investments to which you can contribute.
Invest for growth. To help you reach your goals, you'll want to include a reasonable percentage of growth-oriented vehicles in your retirement accounts. The exact percentage will depend on your risk tolerance and your specific objectives, but it's important to have that growth potential. Keep in mind, though, that investing in growth-oriented vehicles involves market risk and possible loss of principal.
Review your progress. At least once a year, review your portfolio to determine if its performance is still on track to help you make the progress you need to reach your goals.
Make changes as needed. If your investments are simply underperforming, you may need to make some changes. And in the years immediately preceding your retirement, you may also need to adjust your holdings, possibly by moving some dollars from growth-oriented investments to income-producing ones.
However, even at this stage of your life, you may still need your portfolio to provide you with some growth potential — you could be retired for two or three decades, so you'll want your money to last and to stay ahead of inflation.
National Save for Retirement Week comes just once a year. Take its message to heart.
Doug Drost is a certified financial planner for Edward Jones, 2262 Reno Highway.
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