Baby boomers, the generation born between 1946 and 1964, have already reached traditional retirement age. While the most common age to retire is 65, many are choosing to retire early while others are choosing to delay.
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For the most part, a good number of boomers have some form of retirement savings, meaning the majority of them should be able to retire at some point, and hopefully, on their desired timeline. However, due to factors such as longer life expectancy and insufficient savings, many boomers are delaying full retirement or returning to work in some capacity in their later years.
Wealth managers and financial planners alike would say that if you two had four times your annual income in retirement savings by age 50, you would be on track financially for your golden years. Here are some other checkpoints and measurable ways to make sure you’re on course for a financially secure retirement.
Determine Your Retirement Income and Needs
First, you should ask yourself what your ideal retirement income look like. This can be a hard question to answer, but it’s critical to successful retirement planning.
When retirement planning, you should estimate your income to be about 70% of what your salary was while working. Given that the average retirement can last 20 to 30 years, you should budget accordingly now so you can afford your needs later.
Your lifestyle and goals may call for a different percentage than that depending on your unique financial situation, so it’s important to be honest with yourself both about your expectations and what’s within your financial realm of possibility. For example, it might be necessary to consider downsizing or relocation options.
By determining your retirement income needs, you establish baseline priorities that you can later reevaluate as circumstances change. You can find many retirement calculators and budget trackers online to help you streamline this process and give you a rough idea of income needs based on current savings, investment returns and projected Social Security income.
But remember, online tools can only be so accurate — a personalized approach that looks at individual circumstances is always the best course of action.
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Compare What You Have Saved To What You Need
Money experts disagree on the specific percentage of income you should have saved before retiring. A better strategy could be to compare your savings to your estimated retirement income needs. This could mean starting with as much as 10 to 12 times your annual income guideline, then adjusting it based on the cost of living in your city or your desired lifestyle.
If your savings seem to be falling behind after making this comparison, here are some ways to catch up:
- Increasing your 401(k) contribution
- Participating in the 401(k) catch-up contribution if you’re over 50 years old
- Putting sayings into an HSA account for future medical co-pays/needs
- Working a little longer
- Delaying taking Social Security to increase the benefits you receive
Review Your Investment Portfolio
When it comes to investing, there is no one-size-fits-all. The types of investments you make depend on how long you have left to work and your personal financial situation.
As you get closer to retirement age, you should re-evaluate your portfolio to determine where you can diversify or increase your risk tolerance. You want to be able to strike a balance between growth potential and stability so make sure that your portfolio includes a mix of asset classes to better reach your long-term retirement goals.
Monitor and Manage Debt Levels
Keep a close eye on your debt levels, especially as retirement approaches. High living costs can make it challenging to save adequately if a significant portion of your income goes toward servicing debts.
Develop a debt repayment strategy to alleviate this burden and free up funds for retirement savings.
Seek Expert Advice
The last 5-10 years leading up to retirement is a great time to work closely with a financial advisor or planner to make sure your finances are on track for retirement, and if they’re not, to help you course correct. This is when you assess your savings, investments and financial goals.
Having an expert help you is also beneficial as their training can help them pinpoint costs that you may not have thought of such as healthcare, long-term care events or estate planning. It may also give you peace of mind to know that a professional has reviewed your retirement plan and signed off on it.
Final Take To GO: Don’t Fail To Retirement Plan
The bottom line is that everyone’s financial situation is unique. While the aforementioned checkpoints provide a foundation for assessing your retirement readiness, the application can vary depending on your circumstances, the cost of living in your area and your lifestyle choices.
However, no matter what your situation is or how prepared you feel, you should always prioritize retirement planning. This ensures your savings and investments can provide financial security, flexibility and the ability to enjoy your retirement years to the fullest.
Deborah Sabinus contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: For Boomers Closing in on Retirement: 5 Ways To Make Sure You’re on Track
