FAYETTEVILLE, Ark. – In most American households, saving for the next “big ticket” purchase is always on the radar, whether it be a new home, a new car or even a television. More often than not, however, the retirement nest egg isn’t considered something that needs funding in the immediate future.
A survey by GoBankingRates this year revealed that one-third of Americans have no retirement account whatsoever. The poll included respondents from multiple generations – millennials, Gen Xers and baby boomers. Among those, 23 percent have saved less than $10,000 for retirement.
The National Institute on Retirement Savings (NIRS) affirms those findings, reporting that the “average working household has virtually no retirement savings” and households that are near retirement have a median savings of around $12,000. Because October is National Financial Planning Month, it is a good time for households to review retirement objectives and plans.
“Saving for retirement is one of the most important investments consumers should make,” Arvest Wealth Management Regional Investment Officer Ben McLintock said. “Being able to live life on their own terms is priority for every client we serve. The most valuable resource we all have when it comes to planning for your retirement is time. The sooner you start saving, the changes of reaching your retirement goals go up significantly. It’s about finding a balance between saving for the future and enjoying life today.
“Our clients appreciate the value they get from working with a team of professionals to create a sound financial plan to assist them with growing, managing and protecting their retirement funds. Saving doesn’t have to be overwhelming, and getting an early start on building a retirement accounts means less stress later in life.”
For those who have not started saving, McLintock advises to:
- Start saving immediately
- Begin by outlining a budget of mandatory expenses
- Determine how much free cash flow can be set back, even if it’s only 2 percent of your income
- Enroll in employer-sponsored retirement plans, especially those in which your employer matches part, or all, of your contribution. Not doing so is leaving free money on the table.
- Invest a percentage of pay raises, tax refunds and other financial gains into retirement savings
- Set a goal of saving 70 to 80 percent of annual pre-tax income for every year you will be retired
- Diversify savings between 401(k), equities, bonds, traditional savings, etc.
For those who have begun saving:
- Re-evaluate savings goals and objectives
- Diversify savings options
- Determine the financial requirements for your personal retirement lifestyle
- Seek advice from a financial advisor to help define and maximize asset allocation and risk assessment, as well as to update goals periodically.
It’s not uncommon for retirees to be faced with various unexpected expenses during their “golden years,” most of which are the result of poor retirement planning or misguided spending expectations for which they didn’t anticipate earlier in life.
“Once you are relying on your savings to pay for your daily expenses and all the fun things you wanted to do in retirement, it becomes very difficult to bridge funding gaps caused by things like age-related medical issues, or retirement benefits going away when a spouse passes away,” McLintock said. “It’s important to understand that, for most people, the amount of retirement income they will receive from Social Security will not be enough to support them.”
McLintock says those financial hurdles can be avoided with a well-planned retirement goal and a savings strategy that begins as early as possible, when earning is at its peak and savings should be as well.