If you felt something was wrong with your health, you’d head to a doctor for a check-up instead of ignoring your symptoms and hoping they go away. You wouldn’t neglect your physical health, and it’s not wise to ignore signs of frail financi
A new study released by Prudential Financial illustrates that many Americans are doing just that. At least 79 percent of pre-retirees (those between the ages of 45 and 60) are not as financially fit as they should be at this critical stage of preparing for a secure retirement.
“Too many of those polled are not financially ready to retire comfortably,” said Judy Rice, president of Prudential Investments, a business unit of The Prudential Insurance Company of America. “In fact, when rating their financial health, a mere 21 percent are considered to be in excellent shape. The rest are not as fit as they should be, including a significant 34 percent in outright ‘frail’ financial health.”
The good news is that those polled are hopeful and optimistic about their financial futures, despite some uncertainty. Some 62 percent believe they will achieve their retirement goals. But many pre-retirees have a nagging feeling that they should be doing more to prepare for retirement.
The current investment climate plays a role in this uncertainty. Almost half of those surveyed said they feel less comfortable making investment decisions in today’s market than they did a few years ago. However, the study also found that people often don’t seek help from financial professionals.
“We also found that people often don’t seek help from a financial professional because either they think they can go it alone, or that professional advice is only for the wealthy,” said Rice. “The reality is, the less money you have, the more you need to plan to help make sure you get the most out of your investments — and the knowledge of a financial professional can help you get there.”
Here are a few ideas Rice suggests pre-retirees should consider to help them reach their retirement goals:
Estimate how much you’ll need
What do you picture when you think of retirement? Will you work part time or live off your savings and investments? Would the perfect retirement involve traveling or other expenses? Will you stay in your current home or move? These and other lifestyle considerations will influence the amount of money you need once you retire.
Identify all sources of retirement income
Have you established a retirement savings program such as a 401(k) or IRA for you and your spouse? Do you have an annuity? Do you have cash reserves that are easily accessible? Keeping track of these and other assets can help you develop an effective strategy. Figure out how much income you can expect from each source and whether that income is guaranteed or will fluctuate with the market.
Identify obstacles
Do you find that your planned retirement savings often must be allocated to more pressing needs? Paying for your kids’ college tuition or putting a new roof on the house can influence how much you invest for your retirement. While these needs may be more immediate, it is important to start laying the groundwork for retirement, even if that means putting aside a relatively small amount each month.
Incorporate growth potential
Because individuals are retiring younger and living longer, your retirement can last 20 years or more. Over time, inflation can erode the purchasing power of your savings and investments. Make sure you have enough growth potential in your portfolio to outpace inflation and meet your future needs.
Develop an estate plan
Estate planning is another good reason to keep track of your assets, as it will help ensure that your current investment strategies are in line with your estate planning goals.
“It is important to consider these and other tough questions and talk about them with your spouse and a trusted financial professional in order to establish a plan that will help you reach the retirement you’ve always wanted,” said Rice.
— Courtesy of ARA Content
