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4 Steps to Improve Retirement Income


If you're a working American born anytime between 1946 and 1991, the research, analysis and more importantly, the five straightforward actions you can take now to ensure your retirement income doesn't take a dive revealed in the Fidelity Investments' “Retirement Savings Assessment” might be of particular interest to you.

The first-of-its-kind analysis by Fidelity Investments found that many working American households could face a 28-percent loss of income during retirement. Perhaps even more frightening is the 38 percent of retiree households already reporting that their monthly income isn't enough to cover their monthly expenses. In addition to these sobering statistics, however, Fidelity also provided a number of actionable steps individuals could take in order to narrow or entirely close a potentially uncomfortable gap between their retirement income and their monthly living expenses. Whether you're a working member of the Baby Boomer generation, Generation X or even Gen Y, these are four steps you can begin exploring with your advisor today, and perhaps even incorporate into your retirement plan. They're well worth checking out, as many of these strategies can apply regardless of whether you're just getting started in your career, are at the top of your of your working years, or are already retired.

Bolstering Savings

While respondents indicated that they did save an average of $3,500 last year, most Americans are not taking full advantage of tax-favorable workplace-sponsored retirement savings plans or individual retirement accounts (IRAs). This is perhaps the easiest place to begin plugging the holes in your savings plan, so consider contributing as much as you can to your employer's 401(k) plan. If your employer matches your contribution, try to put away as much as your company will match to; doing anything less is akin to turning down free money. Matching contributions are not the only reason why 401(k)s or IRAs are wise investments, however; for example, if your company doesn't offer to match your 401(k) contribution, you still profit from tax-deferred savings. The same is true of IRAs, so if your employer doesn't offer a retirement contribution plan, funding an IRA is an effective alternative. If both courses of action are available to you, talk to an advisor about which plan — or combination thereof — is most appropriate to meet your needs and goals. While maintaining a savings strategy is imperative for investors of all ages, it's particularly crucial for younger workers, as their money will have more time and opportunity to grow.

Reevaluating Retirement Age

It seems as though despite one's age, the average age at which most Americans plan to retire is the ever-popular 65. However, as the Boomers are discovering (indeed, the Fidelity research found that many Boomers are facing a worrisome drop in income), putting off full retirement by a few years can help shore up assets to ensure you don't suffer a decline in their income and standard of living. What's more, Fidelity also cited that even working part time after age 65 can be a powerful way to stretch your retirement assets. 

Adjusting Asset Allocation

While it's certainly understandable that investors of all ages may be a little skittish when it comes to the stock market these days, the Fidelity Assessment found that 21 percent of survey respondents are invested too conservatively in the equities market with what the report describes as “limited exposure" to stocks, based on their current age and planned retirement date. This underscores the importance of working with an advisor to ensure your plan is properly allocated with the right amount of exposure to the long-term earnings opportunities only stocks present.

Tapping into Home Equity

At 72 percent, the tremendous majority of respondents are homeowners, and a full 32 percent own their homes outright and pay no mortgage. The home equity you may have accrued can be used in a number of ways to help stabilize your retirement income, including downsizing your home and pocketing the profits, drawing on that equity to pay off debt or expenses, or using those funds to invest in income generating products.

Indeed, anything you can do to improve your financial position in retirement is worth exploring, so discuss these strategies with your advisor. Together, you should be able to determine the most appropriate steps you can take in order to ensure a positive retirement lifestyle.

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Comment   |  7 years ago from Fort Worth, TX