Savvy investors, when asking “Will I have enough money to retire,” understand the importance of developing a life-long investment plan, and they’ve learned that the earlier they start saving, the better chance they have of securing the lifestyle they desire in those Golden Years.
For sure, the economic uncertainties since 2008 (the Great Recession) has added more dynamics to the investor’s employment picture and family demands. In the latter case, for example, many Generation X investors, those born in the 1960’s to 1980’s, find themselves saddled with caring for their aging parents.
Through it all, the need for reliable investment advice becomes even more critical, according to a fifteenth year, annual study conducted by TransAmerica Center for Retirement Studies on “retirement readiness” of Generation Xers.
“Generation X is in danger of not achieving a financially secure retirement. However, they still have time on their side to improve their retirement outlook in the coming years.”
The study surmises this age group needs to be more disciplined about saving and building a viable portfolio. Investment planning should consider the following:
Embrace the ‘Big Picture’…
Understanding the factors that can impact the health of a portfolio is key to successful planning. Not only should a portfolio analysis be done, but investors need to include other savings and assets, such as rental property. In addition, investorsshould be encouraged to reduce, or eliminate, their personal debts.
The ‘unpredictable’ retirement…
Life’s events, be it sickness or unemployment, can thwart the best-laid retirement plans. Retiring for health reasons can translate into a less robust portfolio with meager income streams to live on. Therefore, investors need to forecast expenses-and-income scenarios before they cross the retirement threshold. Accordingly, they may see the need for long-term care (LTC) insurance to mitigate in-home or nursing home costs, thereby the asset base.
Don’t raid the 401(k)…
Avoid taking early withdrawals, and take advantage of Catchup contributions. For 2015, IRS allows those over 50 to put an additional $6,000 into their 401(k)s.
It’s important to make monthly contributions, but extremely critical to max-out those contributions when possible, especially when the employer offers matching funds. Overtime, this added benefit of “free money” from your employer can help increase portfolio returns.
Understand the ‘basics,’ but seek expertise…
Having a basic understanding of investing principals helps when asking questions about your portfolio. How much ‘risk’ are you willing to take on as you get closer to retirement? Should you add to your projected fixed-income sources with an annuity to cover monthly essentials?
Always, it’s a good idea to abreast of government policies that might affect your 401(k), IRAs or even Social Security benefits—delaying Social Security can increase monthly payments considerably.
“Make investing easy to understand.”
That sums up the Generation Xers dismay when it comes to performing overseeing their portfolio: 65% of the respondents admitted they simply did not “know as much as they should about investing.” Furthermore, about half said they’d like to investment topics “made easier to understand.”
Yet, 10% admitted they are “just not interested.” The shift to ‘defined contribution’ plans…
The decline of the traditional pension (defined benefit) plan to 401(k)s heralds a major change in shifting responsibility to the employee and advisors to make sensible investment choices, such as opting for using target funds in the 401(k). By design, these funds usually adjust their mix of stock funds and bond funds to correspond to the employee’s planned year of retirement.
Successful investing comes down to more than being disciplined in monthly contributions, or saving for goals like a vacation, college and, of course, that all-important emergency fund.
Indeed, investors must look at their retirement plan like a ‘blueprint’ to funding for their future needs.
Contact us to schedule a chat about your retirement goals.