If someone walked up and asked you how your retirement planning was going, how would you answer? If you’re like the average person, you might not know how to respond. If you’re a bit savvier, you might quote the amount you’ve saved up so far. But do you really know if you’re in a position to retire on schedule?
If not, then you’re certainly not alone. Many of us have no clue how much money we need to retire comfortably, much less whether or not we’ll have it when we reach retirement age.
Here is some retirement advice and tips that will help you determine whether or not your retirement fund is on track.
Figure out how much money you need to save. Just like different people have different incomes during their working years, different people have different retirement needs. As a rule of thumb, financial planners advise saving up enough to replace 80% of your pre-retirement income. But if you plan to live the high life in your golden years, you may need more, and if you plan to live frugally, you could do with less. At any rate, you can use an online calculator to figure up how much money you’ll need and how much you’ll need to save each year to get there.
See how your investments are performing. When you choose how to invest your retirement savings. you’ll get an estimate of returns based on the investment’s performance history. While helpful, these estimates cannot accurately predict future performance. So it’s important to take a look at your investments periodically and make adjustments as needed.
Know your risk tolerance. The younger you are, the more risk you can afford to take when it comes to retirement savings. If you’re investing too conservatively, you can bet that your savings are probably not where they should be. It pays to become more conservative when retirement draws near, but until then the best strategy is to go for higher yields.
Evaluate your portfolio. Do you have a good mix of investments? A solid portfolio should contain a combination of domestic and international stocks, bonds, commodities and real estate. If you’re putting all your eggs in one basket, then you could be setting yourself up to fail.
Maintain an emergency fund. Too many people let their retirement savings double as an emergency fund. borrowing or withdrawing money from it when unexpected expenses arise. If you’re using this strategy, understand that it could spell disaster if you become ill or lose your job. Put away 3 to 6 months’ salary in a separate account to be used for emergencies instead. That way you won’t have to worry about paying penalties or repaying a loan on schedule when times are tough.
When it comes to retirement savings, ignorance is not bliss. These tips will help you identify potential problems before they become too serious.
