What should you be doing to prepare for retirement? Top tips and tactics from financial advisors
You're 10 years or less away from retirement. You can clearly see the next phase of your life down the road and it's coming up fast. Are you ready for it? Do you have a comprehensive plan in place so you don't outlive your savings?
If you're not as prepared for retirement as you should be, you're not alone. The Federal Reserve did a study and found that one-fourth of Americans have no retirement savings or pension. And a Money article reports 56 percent of Americans have less than $10,000 saved.
Why aren't more people prepared? There are myriad reasons. Some people are stretched thin. Credit card debt, student loans, rising mortgage and interest rates all conspire to make it difficult for them to save. Others may lack information on the importance of retirement savings, or lack the financial savvy to be comfortable managing their own investments. And then there's the gap between men and women. The Federal Reserve’s study found that among women with any level of education, investment comfort is lower than among similarly educated men.
Yet, retirement is waiting just around the corner. People need good advice to help them build their nest eggs before "someday" becomes "now."
That's why the National Association of Personal Financial Advisors (NAPFA), a national organization representing Fee-Only financial advisors, conducted a poll of its members to get their top tips and advice for people who are nearing retirement. They want to raise consumer awareness about the urgency of preparing for retirement and the importance of having a comprehensive plan in place.
Here are the best tips, advice and tactics for retirement planning from the top financial advisors in the business.
1. Make a list of retirement “needs” and “wants.” If you do not have enough savings for all of your “needs,” make a ten-year plan to increase your funds.
2. Take a hard look at any major debts you have and develop a plan to eliminate them.
3. Brainstorm any “big ticket” financial commitments (caretaking for a family member, etc.) for the next 10 years and consider how these items might affect your ability to save for retirement.
4. Continually monitor and analyze your asset allocation to make sure it is the right one for you. Understand whether you should move to a more conservative asset allocation or continue investing for growth.
5. Be tax efficient with your investments. For example, you should defer as much of your salary as you can to your defined contribution plans.
6. Save to an emergency fund and stay aware of your company’s financial situation. Companies are prone to reorganizations and layoffs, and older workers can be vulnerable.
7. Ask your HR department about the relationship between your current health insurance and Medicare, as well as what your options are when you reach age 65. Get information about any pension or defined contribution options and any other retiree benefits.
8. Research when stock-based compensation might expire and what stock awards you can retain after retirement.
9. Double check your reported Social Security earnings and resolve any discrepancies now. Explore your Social Security claiming options and make sure you understand the timing of applying for benefits.
10. Make sure that all of your estate documents are up-to-date. Verify that your named executors and proxies know your wishes and are willing to act on them if needed.
If you think you’ll need help creating and sticking to a financial plan, NAPFA recommends working with a Fee-Only financial advisor who adheres to a strict fiduciary standard. These advisors are required to put your best interest first and don’t accept commissions on the products they recommend, which reduces potential conflicts of interest. For more information and resources on retirement planning, check out NAPFA’s infographic about the poll. To find a Fee-Only financial advisor in your area, visit the NAPFA website at www.napfa.org and NAPFA’s “Find an Advisor” search engine.