Overcoming the Top 5 Barriers to Retirement Security – The Fool Motley


Financial security is what every retiree deserves. Unfortunately, far too many Americans think that this will never happen to them. And there is a lot reasons why people are worried about what their life will be after employment.

In fact, in a recent survey conducted by Northwestern, five important factors were identified as barriers to retirement security. Among these barriers, there was the lack of savings, which 48% of survey respondents cited as a problem. Health costs were also a major obstacle enumerated by 48% of Americans, as well as by the economy, lack of retirement planning and uncertainty about social security.

All of these problems are undoubtedly pressing, but the good news is that many of these obstacles can to be overcome – especially if you start when you are young. Here's how you can make sure that none of these factors prevents you from taking a safe retirement.

Smiling grandfather holding his grandson on his shoulders.

Source of the image: Getty Images.

1. Lack of savings

Americans have saved far too little for retirement, but if you still work, you have time to do it right. You will simply have to make the economy a high priority.

To make sure that you have the money you need as a senior, your goal should be to save 15% or more of your income for retirement – 10%, this is not enough. This savings must be in a 401 (k), traditional IRA or other account that gives you tax relief to invest in your future. You must also set up automatic payroll contributions so that the money is immediately put into savings before you can spend it.

If you do not currently save 15% or more of your income, which is not the case for most people, set it as your goal. Start with a budget and look for places to reduce your expenses so you can save more for your retirement. Try to slowly increase the amount you save so you can adjust to life without upsetting your lifestyle. As you get increases, use the extra money to save it immediately before lifestyle related inflation absorbs the extra money. This is an easy way to increase your savings because you will not run out of money that you'd never have had. " And, if you wish, consider radical changes, such as driving cheaper second-hand cars so you can invest more in retirement savings. Sacrificing a bit now is worth it later on not to be forced to be retired.

2. Health expenses

Health care is a legitimate concern, as several estimates suggest that seniors may need $ 285,000 or more to pay for non-Medicare covered costs – not including long-term care insurance duration. Although these estimates are based on many assumptions, experts agree that you will probably need a few hundred thousand dollars worth of care during your golden age.

It is imperative to plan in advance. The best way to do this is to invest as much as you can in a health savings account throughout your career and then leave the money invested so that it can grow and be used during retirement. HSAs are a great way to cover the costs of care because you can make tax-deductible contributions and tax-deductible withdrawals, provided the funds withdrawn are used to pay for medical care. Unfortunately, you can only invest in an HSA if you have an eligible high-deductible health plan, so that not everyone can enjoy these tax benefits.

If you can not put money into an HSA, increase your 401 (K) or IRA contributions to make sure you have enough savings for health care. If you contribute to a 401 (k) at work, you may decide to open an IRA specifically dedicated to creating a health care fund. You should also consider long term care insurance to help you pay for nursing or home care. You should also review the Medigap and Medicare Advantage plans to make sure you choose the most comprehensive coverage possible. Remember that Medicare does not cover a lot of important services, so be prepared to pay out of pocket expenses such as dental and long-term care.

3. The economy

You can not do much about the economy as an individual, but you can try to make sure your safety as a senior does not depend on the smooth functioning of the US economy.

How are you doing that? Save enough money so that if you are forced to leave the job market a little earlier, your nest egg will support you. Also, diversify your portfolio by investing in a variety of assets, including large and small US companies, as well as bonds and emerging markets. When you have saved a lot of money and you have a diversified portfolio, economic downturns do not matter so much and do not reduce your chances of a successful retirement.

4. Lack of planning

Insufficient planning is entirely in your power: you only need to prepare a plan.

Aims to set specific, measurable and achievable financial goals that focus on debt repayment, increase in net worth and retention of a substantial amount for retirement. Take the time to determine the savings you will need as a senior – try one of these methods – then set aside money every month to reach your goal. If you still feel uncontrollable about your money, consider consulting a financial advisor. A professional can review your current financial situation and future goals to make sure you are about to have the money you need as a senior.

5. Uncertainty of social security

To worry about the future of Social Security is a waste of time, as indicated by the report of the Social Security Trustees for 2019, the Social Security Trust Fund will remain solvent until the end of the year. in 2035. Even if no action is taken and the funds of the trust fund exhaust, this is not the case. t means that benefits will no longer be paid. Much of social security money comes from social charges levied on current workers. Since these payroll taxes will continue to be collected, social security will still be able to pay about 80% of benefits in 2035 and beyond. It is very unlikely that changes will be made to avoid benefit reductions before that, but even in the worst case, future retirees will still benefit from most of their benefits.

Instead of worrying about what will happen to the benefits of social security, focus on maximizing your personal advantage. You can do this by earning as much income as you can, because Social Security benefits are based on average inflation-adjusted wages in the 35 years your income has been highest. You will also want to make sure you work at least 35 years to avoid taking into account years of $ 0 salary when your average salary is determined. Delaying the payment of benefits until at least the age of retirement, and ideally until the age of 70, will also allow you to maximize your monthly income because the prepayment benefits reduce them until you reach the age of 70.

You now know how to overcome these five big obstacles

By developing a plan, saving more and learning about how social security works, you can make sure you have the income you need to truly enjoy life after you leave the workforce. The sooner you put your plans in place, the better your chances of being a financially secure senior – start today.

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