It's natural to have retirement concerns under normal circumstances, but during a pandemic, those worries can surely escalate. In fact, 69% of Americans in their 50s are more concerned about retirement today than they were a year ago, as per the May 2020 Simplywise Retirement Confidence Index. If you feel similarly, here are a few important steps to take.
1. Assess your savings
Though there's no single savings target that guarantees financial security down the line, as a rule of thumb, it's good to aim to retire with 10 times your ending salary socked away in a 401(k) or IRA. If you're in your 50s and still plan to work another 10 years, you may not know exactly what your ending salary will look like. But if you're currently earning $80,000, a decade away from leaving the workforce, and expecting a 3% annual cost-of-living raise, which is pretty typical, you could be earning as much as $107,500 by the time your career comes to a close. And in that case, you'd want just over $1 million in savings.
If you're currently sitting on $700,000 or more, you're in pretty good shape, assuming you plan to keep contributing to your 401(k) or IRA. But if you only have $400,000 in savings, it means you may need to ramp up as soon as you're able to increase your contributions.
Right now, a lot of people are struggling because of the COVID-19 crisis, so you may have no choice but to pause retirement plan contributions while you ride out the storm. But if your income has held steady, see if you can do better on the contribution front if you're behind.
2. Allocate your assets properly
You'll probably rely on your 401(k) or IRA heavily in retirement. To feel better about reaching that milestone, make sure your assets in that account are allocated appropriately. Ideally, you should eventually have enough money in that account in cash to cover at least a year's worth of senior living expenses. If you're in your 50s with another decade of work ahead of you, you don't need to keep too much of your account in cash right now, but plan on that shift as retirement inches closer.
Meanwhile, you should have a portion of your retirement savings in bonds, which are far less volatile than stocks. But don't dump all of your stocks, either -- you need those to maintain decent growth in your retirement plan.
Take a look at the way your assets are allocated within your 401(k) or IRA and make sure it's age-appropriate. If you're in your 50s, you shouldn't be 90% invested in stocks, but you also shouldn't be 90% invested in bonds. You may need to shift some assets around once the market recovers to better prepare for your senior years.
3. Map out a retirement budget
One of the reasons retirement is so daunting is that many people don't really know how much it will actually cost. And while you can't predict that precisely, you can start mapping out your anticipated expenses to see how much annual income you'll need to cover your bills. That will give you a sense of how well you're doing with your savings, and it may help you land on a target retirement date.
Many people are concerned about retirement, in general, and the introduction of a pandemic and economic crisis has no doubt made those apprehensions a lot worse for a large number of older Americans. If you're worried about retirement, be proactive in planning for it by following the steps above. Running numbers and setting some guidelines for yourself could help you feel a lot less overwhelmed.