Pursuing your retirement dreams can be challenging. The thought of giving up the stable paycheck to usually smaller Social Security benefits along with Individual Retirement Account (IRA) withdrawals can be scary. For many, pensions are a thing of the past. This leads to many questioning “Do I have enough money to retire?”
However, before that question is answered, there are some others that need to be asked first. Let’s look at some:
1. “Do you have a strategy for retirement”: The biggest mistake is having no strategy at all. Without a strategy, you may have no goals, leaving you no way of knowing how you’ll get there—and if you’ve even arrived. Creating a strategy is very important in preparation for retirement.
2. “Do you have large amounts of debt”: If too much debt is bad when you’re making money, it can be deadly when you’re living in retirement. Consider managing or reducing your debt level before you retire. If looking to retire soon, it may be beneficial to make larger payments to high-interest debt instead of making extra Tax-Deferred contributions to a 401(k) or IRA.
3. “Are you taking too much risk in your investment portfolio”: Some may be unaware what risk they are taking at all! Have a strategy that is properly diversified to reflect YOUR objectives, risk tolerance, and time horizon; then make adjustments based on changes in your personal situation, not due to market ups and downs.1
4. “Are you maximizing Tax-Deferred Savings”: Workers have tax-advantaged ways to save for retirement. Not participating in your employer’s 401(k) may be a mistake, especially when you’re passing up free money in the form of employer-matching contributions.2
5. "Are you staying healthy" It's not only about money! Above all, a rewarding retirement requires good health, so maintain a healthy diet, exercise regularly, stay socially involved, and remain intellectually active.
As you can see, first and foremost is having a strategy. Also important to remember is that the strategy may need to be adjusted over time. Why? Well…because life happens! Sudden expenses arise, so expect the unexpected! The due diligence of being able to answer the initial question of “Do I have enough money to retire” ultimately never stops.
1. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification are approaches to help manage investment risk. Asset allocation and diversification do not guarantee against investment loss. Past performance does not guarantee future results.
2. Under the SECURE Act, in most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty."
3. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. Past performance does not guarantee future results.