40% of Americans will regret retirement sooner than they think


Mall of today’s young workers have a remarkably cavalier attitude to retirement savings. It may have something to do with the fact that for them retirement is still decades away. But this time flies faster than many realize. If you want to give yourself the best chance for a comfortable future, there is one mistake you can’t afford to make.

Are you seriously planning your retirement?

According to a recent Transamerica poll, about 40% of workers of all generations prefer not to think or worry about investing in retirement until they are closer to retirement. This attitude was most common among Gen Z and Gen Y, where 54% and 48%, respectively, felt this way. Yet it even exists among some members of Generation X and Baby Boomers.

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The problem with waiting to take your retirement investment seriously is that each year you postpone it makes your job harder. Your previous pension contributions end up being the most valuable later, as they tend to accumulate the most investment income. Your most recent contributions aren’t invested that long, so they have a shorter growth window before you withdraw them.

When you start saving later, you need to set aside more of your own money each month to retire when you want. For example, let’s say you want to retire at 65 and think you need to save $ 1 million on your own. If you started saving at age 25, you might just need to set aside about $ 403 per month to reach your goal. But if you waited until 26 to start, you should now be saving $ 433 per month, and if you waited until 30, you should save around $ 581 per month.

You would end up contributing over $ 50,000 more of your own money if you carried over your retirement savings to age 30 instead of starting at age 25. And you could cost yourself even more if you wait even longer to start.

To be clear, the Transamerica poll didn’t say that survey respondents weren’t saving for retirement, only that they’d rather not think about investing for retirement until they were closer. of their retirement date. But investing without thinking can also create challenges.

If you don’t pay close attention to your investments, you could make costly mistakes, such as not adjusting your asset allocation to suit your risk tolerance or choosing high-cost investments that slow your savings growth. You could also end up saving less than you need if you don’t have a plan for the cost of your retirement.

Solving these issues on the eve of your retirement is difficult and may not be possible in all cases. That’s why it’s crucial to take retirement savings seriously, no matter how far away you are from retirement.

How to make sure your retirement investment plan is on track

You can’t tell if you’re saving enough for retirement until you have an estimate of the cost of your retirement. Understanding this should be your first step if you haven’t already.

You will need to know when you plan to retire and how much you plan to spend each year. Keep in mind that your spending habits in retirement may change from where they are now. You will also need to include estimates of inflation and the growth of your investment. Use an estimated annual inflation rate of 3% and an investment rate of return of 5% to 6% to be on the safe side. A retirement calculator can help you put all of this information together.

Once you know the total cost of your retirement, you can subtract the money you expect from Social Security, pensions, or other sources to determine what you need to save on your own. Your retirement calculator can help you reach a monthly savings goal.

Try to answer that if you can. You may need to change your budget so that you can spend more money on your retirement. If your plan doesn’t seem feasible, you may need to delay retirement to give yourself more time to save.

Also, be sure to think about where you are putting your money rather than just throwing it in a retirement account and forgetting about it. Choose your retirement account carefully based on which offers you the most benefits. This could be a 401 (k) if your employer offers a match, or a Roth IRA if you want to make tax-free withdrawals in retirement.

Also think about your investments. Choose low-cost options, such as index funds, where possible, to keep more of your savings. Make sure your asset allocation also matches your risk tolerance. A good rule of thumb is to keep 110 minus your age invested in stocks. This means that you would have about 80% of your savings in stocks at 30 years and the remaining 20% ​​would be in bonds. As you age, you adjust your asset allocation to help protect your growing nest egg.

Once you have a retirement plan, reviewing it once or twice a year shouldn’t take that long. This will allow you to stay focused and ensure that you are doing what you need to enjoy a comfortable retirement.

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