If you're like most people, you probably dream of the day you can finally retire. But as you get closer and closer to that milestone, you may start to realize that you're not as prepared as you thought you'd be. Here are a few reasons why that might be the case—and what you can do about it.
- You Haven't Saved Enough Money
If you want to retire comfortably, experts say you'll need to have saved at least $1 million. And if you want to retire earlier than age 65, you'll need even more. The problem is, most people haven't come close to saving that much. In fact, according to a recent study, the median retirement savings for Americans within their employer-sponsored plans is only $256,244*.
- What can you do if your savings are falling short? For one thing, you can start by taking advantage of catch-up contributions if you're over age 50. You can also consider working a few extra years or downsizing your lifestyle now so that you can boost your savings and live more comfortably in retirement.
- You Have Debt
- If you're still carrying around credit card debt, student loans, or a mortgage when you retire, it's going to eat into your nest egg pretty quickly. In fact, according to NerdWallet, a household with $5,000 in credit card debt and an interest rate of 16% will spend $800 a year**. In interest alone over the course of 20 years, that’s $16,000! With rising interest rates, this will leave the household with less money to cover other expenses like healthcare and travel in retirement.
- You Don't Have a Plan
- Retirement doesn't just happen—you have to make it happen with some careful planning. That means figuring out how much money you'll need to cover your living expenses, healthcare costs, and other needs. Once you have a goal in mind, you can start working backwards to come up with a plan for how much money you need to save each month (or year) in order to reach it. A professional financial planner can help you design a plan that fits your needs for the future.
- You Haven't Reviewed Your Investments Lately
- Your investment portfolio probably looked a lot different when you first started saving for retirement than it does now. And that's not necessarily a bad thing! As you get closer to retirement age, your investment goals will change—and so should your portfolio. Make sure to review your investments at least once per year (preferably with the help of a financial advisor) to ensure that they're still aligned with your goals.
- You Don't Have Long-Term Care Insurance
- No one likes thinking about the possibility of needing long-term care—but it's something that's important to plan for nonetheless. According to estimates from the Department of Health and Human Services, nearly 70% of Americans over the age of 65 will require some type of long-term care services at some point in their lives—and those services can be expensive. If your health insurance doesn't cover long-term care costs (and most don't), then long-term care insurance is something worth considering—especially if it would allow you to stay in your home rather than moving into a nursing facility.
As exciting as retirement seems, it is important to make sure that you're actually prepared before making the leap. That means saving enough money, getting rid of debt, planning ahead, reviewing your investments regularly, and considering long-term care insurance options. If you take the time to do all of those things, then you'll be on track for a comfortable and enjoyable retirement—regardless of when it happens.
*According to Vanguard’s “How America Saves 2022” report, page 47
**According to Nerdwallet’s “Forget the Fed, Pay Off Your Credit Card Debt”
*** According to How Much Care Will You Need?. 02/18/2020 https://acl.gov/ltc/basic-needs/how-much-care-will-you-need