The Retirement Savings Goal Most Americans Are Missing
Written by
J. Arky
Edited by
Amen Oyiboke
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If you are someone who is currently in the workforce and retirement seems like an issue to address years from now, you might already be doing yourself a disservice. That’s because so many Americans wait to address setting up their retirement for success until it is almost too late to course correct, believing it to be out of sight and mind until clocking out of the workforce.
Trevor Houston, CEO at ClearPath Wealth Strategies, LLC, described his own experience of being lulled into the experience of putting his retirement on autopilot, something that “… can create an environment where you aren’t paying attention and make mistakes that can quietly sabotage your financial future.”
GOBankingRates got Houston’s insights on the three major retirement savings goals most Americans are missing daily.
Consolidate Forgotten 401(k)s
According to Houston, millions of dollars are left behind every single year in old employer plans.
“The process of consolidating your accounts can help lower fees and make the management easier while giving you back control over the investments,” said Houston. “Many financial institutions even offer rollover incentives that can give your retirement balance an immediate boost.”
Houston noted that the “real goal isn’t just saving more, it’s about making sure what you’ve already saved is organized, optimized and working hard for you, not scattered all over the place.”
Recalibrate After a Setback
“Life happens: layoffs, medical bills, caring for a loved one. Retirement plans can easily become derailed by these unexpected life events. The goal here is not perfection, it’s recalibration,” emphasized Houston.
Houston reminded American workers that they should start by making small, regular contributions again. “Run the numbers. Ask: What does ‘catching up” look like for me?’ The sooner you confront it with clarity, the less fear and insecurity will be hanging around in the background,” said Houston.
Knowing the ‘Why’ Behind the Numbers
Many people concentrate only on reaching a certain dollar amount in their retirement savings, though Houston outlined that to reach a suitable amount, the math must be done backwards.
“What monthly income will support your lifestyle in the future? Consider inflation because a million dollars today doesn’t have the same buying power as a million dollars 20, 30 or 40 years down the road. How much will you need in a bucket to generate the monthly income? How long could it last?” said Houston.
Without clarity, Houston pointed out that “even larger balances can feel insecure because the understanding isn’t there. The lack of knowledge creates empty spaces where fear can take over.”
Strategies for Getting Back On Track With Your Retirement Savings
T. Rowe Price described that by age 35, a reasonable retirement savings would be one and a half times your income. At age 50, your retirement savings should be anywhere from three and a half to five and a half times your pre-retirement gross income. Once you reach 60 years of age, you ideally want to have six to 11 times your salary saved for retirement usage.
Houston suggested that everyone schedule a retirement “audit” every year.
“All your accounts and balances and beneficiaries should be gathered into one location,” Houston said. “Consider rolling over and consolidating old plans so you can actually see your full picture. Take advantage of catch-up contributions after age 50.”
Most importantly, Houston stressed not to be afraid to ask for help.
“A lot of people fail because no one showed them the rules of the game,” said Houston. “If you’ve found yourself off track, don’t beat yourself up. You might discover an old 401(k) account that you had forgotten about, which would result in more money than you expected. With the right adjustments and clarity, you can still turn your setback into a comeback.”
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