Americans today know that they are less prepared for their retirement because they have been using their savings to pay for bills and other expenses. As a result, they are risking a delay in retirement or a financially insecure retirement. However, according to the Eleanor Blayney, CFP, a consumer advocate from Certified Financial Planner Board of Standards, Inc. (“CFP Board”), there’s still time to establish a plan that can help you achieve a financially stable retirement.
Blayney comments, “Today’s retirement is no longer defined by the moment we file for Social Security, or start taking our required IRA distributions. Instead, we must create financial strategies that unfold gradually over a period of time, to financially secure our golden years.”
Among the twelve steps in the CFP Board’s year-long “12 for ’12 Approach to Financial Confidence” is to plan and save for retirement. According to the 2012 Household Financial Planning Survey, conducted by CFP Board and the Consumer Federation of America, many feel they have fallen behind on retirement savings.
Blayney suggests 5 keys to help pre-retirees prepare for retirement:
- Plan within your means.
To plan within your means, simply put, means that you adjust your lifestyle according to what you currently have and what you are currently earning. Set a retirement plan within your earning capacity. There are a lot of average income earners who can enjoy a comfortable and sustainable retirement with the help of their savings and Social Security, while millionaires can go bankrupt in retirement.
Diversify your retirement investments.
There is no single financial product, savings account, or fund that can sustain your retirement needs. For instance, annuities can help you earn a steady income, but they may not provide you with your needs should you encounter unexpected or big expenses in the future. A great tax-advantage while you are accumulating your retirement account is to save in a 401(k) or IRA; however, this savings vehicle may not provide the tax flexibility needed when you begin to withdraw.
Expect to continue generating your own income.
Planning for your retirement does not mean that you will receive a guaranteed and predictable source of income. Social Security does not prove to be perfectly secure and fewer companies are offering defined benefit plans to their employees. More and more Americans are finding they are required to continue working in some capacity through retirement years to maintain their lifestyle.
- Embrace cost-sharing.
In reality, retirement planning includes accepting the fact that you need to prepare to accept help from others, whether it is medical care, financial decision making or alternative housing options. Retirees may need to be prepared to address a shortfall in savings and explore options through community resources and services available.
- Consult an expert.
A successful retirement depends on several factors: managing your debt, taxes, expenses, insurance and more. It can certainly make a difference if you seek advice from a CFP® professional who can assist you in making the right decisions to meet your retirement goals.
Source: Getting Ready To Retire?