It plays to everyone’s worst fears. Over half of Americans risk not being able to cover housing, health care and food in retirement, according to Fidelity Investments’ biennial Retirement Savings Assessment study.
The reason?
They’re unsure where to start or are concerned their personal retirement income goal may be unattainable. However, the Boston-based investment behemoth says actions can be taken to gain better control over their financial future and boost retirement preparedness. These include:
- Raise savings. Even small increases in savings can make a big difference. Some relatively painless ways include investing salary increases into savings or increasing contributions to a workplace savings plan by just one percent every year. Make the most of tax‐advantaged savings vehicles such as 401(k)s, 403(b)s, IRAs, Health Savings Accounts and tax‐deferred annuities. Also consider a Roth IRA or 401(k), where contributions are after‐tax but withdrawals are income tax free. As a general guideline, set an annual goal of saving 15 percent or more of their income (including any employer match they may have).
- Review their asset mix. Although they can’t anticipate market behavior, they can build the potential for long-term growth into your portfolio through investment choices and exposure to various asset classes that can provide growth and outpace inflation, while also limiting downside risk.
- Retire later. The longer they can wait, the more time there is to build savings. In addition, waiting until at least the time they’re entitled to full Social Security Retirement benefits (between 65 and 67) may help increase their monthly benefit. If they can afford to wait until their full retirement age, their monthly Social Security income will increase by 30 percent.
“Our analysis shows that using these three ‘accelerators’—either individually or in combination—can have a substantial impact on retirement readiness,” said John Sweeney, executive vice president of Retirement and Investment Strategies at Fidelity. “In fact, when all three are applied, America’s retirement score jumps all the way to 100, putting many more individuals in a better financial position to truly enjoy their retirement years.”