It’s a good time to think about your retirement savings strategies.
Congress even designates the third week in October as National Save for Retirement Week.
Ensuring you have enough money to support your retirement lifestyle is important. Unfortunately, many Americans have apparently not done enough to build retirement savings to ease their minds.
Consider these figures from the Employee Benefit Research Institute’s 2013 Retirement Confidence Survey:
• 49 percent of survey respondents said they are unconfident about being able to afford a comfortable retirement.
• 46 percent of survey respondents say they and/or their spouse have tried to calculate how much money they will need to live comfortably in retirement.
Here are some steps can you take to gain confidence in your ability to retire comfortably:
• 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 part-time work or consulting? It’s important to identify your retirement goals and, as best as possible, estimate how much they will cost. Once you know what your retirement goals look like, you can 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.) 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. You’ll need 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: Investing in growth-oriented vehicles involves market risk and possible principal loss.
• Review your progress. At least once a year, review your portfolio to determine whether its performance is still on track to help you make the progress you need to reach your goals.
• Make necessary changes. If your investments are underperforming, you may need to make some changes. 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.
Joe Faulk is a financial adviser.