Retirement feels like it’s years and years away. You love living in the moment and embracing everything life has to offer right now. Overlooking the future, however, could leave you less than ready for an enjoyable retirement. Watch for these five signs that could mean it’s time to ramp up your approach to retirement savings.
1. You haven’t done the math.
Can’t put your finger on exactly how much money you need to retire comfortably? Then how do you expect to be able to retire in the manner that you want? Numerous websites, including Bankrate and SmartAsset, enable you to estimate how much money you’ll need for retirement. If you’re seeking a more precise calculation, consider tapping the expertise of a financial planner or financial advisor.
According to AARP, the “rule of thumb is that you’ll need about 80% of your pre-retirement income when you leave your job.”
No matter how you do it, this math should be part of a planning checklist that can help put you on the right track toward retirement.
2. You’re overspending.
When you overextend yourself on expenses, it results in fewer dollars being available for retirement savings. This could involve spending too much money on vacations, gadgets, or other things that aren’t absolute necessities. Or it could be that you’re spending more than is generally recommended on housing costs or you’re racking up debt on high interest credit cards. Whatever overspending situation you find yourself in, it’s time to work on spending less.
How can you tell the difference between spending and overspending? Business Insider notes that you might be wasting money if:
- You never check how much you’re spending.
- Your housing costs more than 25% of your monthly paycheck.
- You dig into your savings to make your car payment.
- You reach for your credit card more than your debit card.
- You buy pre-cut produce, bottled water, or premium gas.
In many cases, you should be stashing at least 20 percent of your gross income to help achieve long-term goals, such as attaining financial freedom and retiring comfortably.
So if your annual gross income is $100,000, this formula would suggest that you put aside $20,000 a year for long-term goals like retirement. Everyone’s situation is different, so you may want to visit with a financial planner or financial advisor to clarify how much money you should be saving for retirement.
3. You’re not maxing out retirement contributions.
In 2017, just 13 percent of participants maxed out their contributions to employer-sponsored 401(k)s, according to Vanguard, a provider of 401(k)s. And in 2020, one fourth of Americans who aren’t retired had not a single cent set aside for retirement.
Those statistics underscore how many Americans are missing the mark when it comes to contributing the full amount each year to 401(k)s and other retirement accounts.
For 2021, the maximum employee contribution to a 401(k) is $19,500. If you’re at least 50 years old, that figure jumps to $26,000. With IRAs, the maximum contribution for 2021 is $6,000. The number climbs to $7,000 if you’re at least 50 years old.
How do you measure up when it comes to contributing to your retirement accounts? If you haven’t been maxing out your contributions each year, you might consider adjusting your budget to ensure that you’re able to do so.
4. You’ve piled up too much credit card debt.
The average U.S. household wrestles with slightly over $8,000 in credit card debt. That’s just over $8,000 that could be going toward your retirement. And this doesn’t even include the hundreds of dollars of interest you could be paying on that more than $8,000 in debt.
If you find yourself with thousands of dollars in credit card debt, you could do your future self a favor by chipping away at that debt as soon as you can. The less money you’re racking up on credit cards, the more money you can allocate for retirement.
5. You’re not looking at alternative assets.
It’s wise to ensure that your portfolio is diversified when gearing up for retirement. In other words, don’t put all of your eggs in one basket. If you do, some or all of those eggs could crack.
One path for portfolio diversification is setting up a self-directed IRA, which can be a fast, simple way to mix up your asset allocation. Through one of these IRAs, you can purchase and keep gold, silver, platinum, or palladium, along with other alternative assets. Among other things, a self-directed IRA may help you preserve wealth and weather market fluctuations.
Start small, but start right now. Download U.S. Money Reserve’s free Precious Metals IRA Information Kit for easy-to-understand information about retiring with wealth in your hand.