With health care costs going up, the future of Social Security being unclear, and fewer and fewer workers being able to get pension plans, Americans' ability to retire is a big worry for both individuals and the country as a whole.
Since June 2004, Fidelity Investments has helped about 200,000 retirees and people getting close to retirement figure out how ready they are for retirement. Fidelity found out that some simple investment strategies that are often overlooked can help ensure a more comfortable retirement. Here are some basic ideas to think about.
- Make it work while you are still working. Investors in their highest-earning years should make the most of retirement plans offered by their employers, individual retirement accounts, and deferred annuities.
Asset allocation should be based on a person's age, and investors should avoid being too cautious or taking too many risks when deciding how much of their money to put into cash, stocks, or bonds. But keep in mind that this does not guarantee a profit or prevent a loss.
People may also want to think about simple trade-offs that can cut costs and help them save more, like keeping the family car for a few more years after it is paid off.
- Make it last as long as you do. When you reach retirement age, it is very important to make your savings last as long as possible. Some investors plan to work after they retire, while others put off retirement so they can get more money and keep getting health care benefits.
People who are getting close to retirement may want to put their salaries into income annuities, which some people call "self-made pensions" because they guarantee income for life.
Lastly, since Americans are living longer and market returns are hard to predict, taking out less money in the early years of retirement could lead to more financial security in the long run.
- Make it count if you want to live the way you want to live. Investors who are able to live the way they want to in retirement usually have a detailed, realistic budget for living costs in retirement. Investors should plan for things like rising health care costs and other possible financial problems. Individuals and their spouses should look over their plans, including expenses, investments, and asset allocation, once a year to help them stay on track.
To have a good retirement, you need more than a one-step plan. Whether it's getting a "fun" part-time job, getting rid of one of the family cars, or taking a vacation close to home, retirees have used a variety of methods to increase their incomes, keep their spending in check, and save as much money as possible. - NU
