Retirement planning is a never-ending process. Even if your retirement is only a few years away, it’s never too late to start planning towards it.
If you’re having issues getting on with your retirement planning, maybe these retirement statistics can spook you into taking action.
1. Unsettling Truths
Only 73% of Blended Retirement System Thrift Savings Plan active-duty participants were contributing the required 5% to the Thrift Savings Plan (TSP), according to minutes from the Federal Retirement Thrift Investment Board meeting in August 2021. That means nearly a third of people are squandering free money. If that doesn’t frighten you, think about the fact that the majority of those may not have any other savings set aside for retirement.
What Can You Do?
If you’re worried about having enough income during retirement, find a way to make the 5%—or larger—contribution to the Thrift Savings Plan (TSP) a regular part of your budget.
To do this, you may need to create and stick to a budget and reduce or eliminate several expenses. The common culprits when reducing expenses are unused gym membership and cable TV. You can also save a lot by cooking at home, buying groceries in bulk, and more. Every little money you’re able to save should go straight to your retirement fund.
Also, allocating “found money” like time in service pay increases, promotion raises, cost of employment increases… or a portion of your advance child tax credit payments can help make this a reality. Found money is unexpected money or money that isn’t part of your original income. So you won’t feel any financial constraints by saving them.
2. Terrifying Truth
The Employee Benefit Research Institute has performed a Retirement Confidence poll every year for the past two decades. Only 27% of respondents said they were “extremely certain” that they would be able to live comfortably throughout their retirement years in 2021.
What Can You Do?
If you’re scared about running out of money in retirement, start putting money aside for it right now. It doesn’t take much to get things started. You can participate in the Thrift Savings Plan (TSP) whether or not the Blended Retirement System covers you. By signing up at myPay or through your service payroll provider, you can contribute as little as 1% of your earnings. This extra 1% will result in a substantial amount when compounded over time.
3. The Frightening Reality
Throughout the epidemic, I praised the increase in the Bureau of Economic Analysis’s savings rate. However, in recent months, it has gotten worse. The most recent figures show a rate of 7.5%. Retirement is simply one savings goal, but there are likely to be many more, and 7.5% is unlikely to be enough. Imagine if you have to save for a mortgage down payment, kid’s college payment, emergency fund, and others in addition to retirement.
What Can You Do?
If you’re scared, you should start saving right now. Don’t limit your savings to just 7.5%. Ensure to go all the way. Stretch yourself as much as possible and save as much as you can, especially if you are approaching retirement.
The retirement savings of someone in their 50s have less time to compound compared to that of someone in their 30s or 40s.
4. The Sobering Reality
According to the Boston College Center for Retirement Research’s January 2021 National Retirement Danger Index update, 49% of working households are at risk of a lifestyle drop when they retire. That was an improvement over the original study, but it was still not a happy ending.
What Can You Do?
Make your own retirement strategy. What would it take for you to live the life you desire and accomplish your goals? There are numerous online tools and calculators available to assist you, such as those found at usaa.com/goals.
Start by calculating how much you’ll need to live comfortably in retirement. How much would you need to take care of yourself, your spouse, and your dependents? Once you have that amount, calculate how much you need to save monthly or yearly to have that much saved up before retirement.
5. The Unnerving Reality
How far would $1,543 get you in terms of sustaining your lifestyle in retirement? In 2021, that will be the average Social Security retirement benefit. You’ll almost certainly require a lot more.
What Can You Do?
Don’t rely solely on Social Security to pay your retirement. Social Security wasn’t created to be the sole source of income in retirement. Rather it was created to complement other income sources and carter for less than 40% of retirement funding.
Ensure you have a plan in place that incorporates numerous sources of revenue. Pensions, IRAs, workplace retirement programs like 401(k), annuities, real estate, non-retirement stocks, mutual funds, bonds, and exchange-traded funds are all ways to supplement Social Security and avoid relying solely on it. While this may sound difficult, it’s very doable once you create a budget and follow it through.
6. The Startling Reality
Employer retirement schemes, such as the 401(k) and the military’s Thrift Savings Plan (TSP), are a cornerstone for retirement savings. Vanguard Investments reported in June 2021 that the average account balance of participants was $129,157.
What Can You Do?
$129,157 might be a good number if you’re 28, but not so much if you’re 58. Find out where you are right now. Focus on solid retirement savings practices if you’re just getting started. If you’re further down the road, it’s time to figure out what you want to save for… I assume that it’s a lot more than $129K.
Use online calculators and other tools to determine how much you need in retirement and how much you can save monthly to achieve that amount.
Have you been jolted into action? I sincerely hope so.
Contact Information:
Email: [email protected]
Phone: 6232511574
Bio:
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
Disclosure:
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