Retirement-phobia
Fear of the unknown is a real and visceral experience. There are many unknown factors when it comes to saving for your retirement and it can be a guessing game, especially when you don’t have the knowledgeable guidance of a financial professional.
No one knows how long they will live, and life expectancy is an ever increasing phenomenon. Unexpected health issues may arise, and long-term care might be a serious concern. Nearly 70% of Americans 65 and older need long-term care at some point. That means no one knows just how much to save.
Because of all these future unknowns, it's not surprising then, that a good portion of Americans experiences fear or stress about retirement. Whether it's fear that the money won't last, that Social Security won't be there, or that one's health will deteriorate, concerns can drive savers into unnecessary or unsafe investment vehicles. On the other hand, fear can also lead to avoiding risk altogether.
One thing that will have an effect on your state of mind is reducing the stress of worrying about your retirement income. Find out what your reliable Social Security income will be and how much you are due through retirement savings accounts. Putting together a budget and staying on top of your spending habits, will go a long way to set your mind at ease, knowing what money is available to you, and eliminating sleepless nights.
Here are some smart tips for taking control of retirement fears:
Enroll in the 401(k)
Most major companies that offer 401(k) plans match a percentage of your contributions. Typically, these matches range from 25% to 100% of your contribution, up to 6% of your salary.
Fund a Roth IRA
Many small employers don't have the money or manpower to offer a 401(k) plan at all, let alone one with a company match. That means you have to create and manage your own retirement plan.
Pay off student loans
Federal student loans have fixed and relatively low rates. [4] Pay them off along with other debt you’ve accumulated.
Resist cashing out
When you leave a job, you have several options for your 401(k) plan. You can leave it with your former employer, roll it into an IRA, roll it into your new employer’s plan (if your employer permits such rollovers), or ask your former employer to cut you a check.
You may be tempted to choose the last option, but in most cases, that's a bad idea. Your employer will withhold 20% of the amount withdrawn to cover income taxes. And if you're under 55, you'll also have to pay a 10% early-withdrawal penalty on the entire amount. Plus, you're jettisoning any growth you've earned, which sends you back to square one when you start saving again.
With a sound financial strategy, you could retire with quite a large sum of money in your pockets.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC