There's a good chance you'll become heavily reliant on your savings once your time in the workforce comes to an end. So it's a good idea to make sure your nest egg is as robust as possible.
Some people make the mistake of retiring on Social Security alone, thinking it will take the place of their former paychecks. In reality, Social Security will only replace about 40% of your pre-retirement earnings if you make an average salary. And that's not accounting for potential benefit cuts.
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That's why it's so important to work on building yourself a nest egg. And in this regard, 47% of savers think they're on track, according to a recent survey by Natixis.
But that also means that more than 50% of retirement savers do not feel they're socking away enough money for the future. And if you feel similarly, it may be time to make these changes.
1. Rethink your spending
The less money you spend on expenses, the more you'll free up for retirement savings. It's that simple.
But you may be thinking: "There's no way I can cut back on spending. I'm already being frugal." But are you?
Comb through your most recent credit card bill or two. Chances are, there are some expenses on there you can flag as non-essential, whether it's takeout orders or a subscription you no longer get good use from. Cutting those expenses could free up cash for your IRA or 401(k) plan, even if it's only a small amount.
2. Make sure you're investing aggressively
One reason you may be unhappy with your retirement savings balance to date is that you haven't been investing in riskier assets with the potential to generate a higher return. If you've been playing it safe with your nest egg, rethink that approach by going heavier on stocks while retirement is still a good number of years away.
It's not only acceptable but appropriate to shift over to safer, more conservative investments when you're within a few years of ending your career. But if you're in your 20s, 30s, 40s, or 50s with no plans to retire anytime soon, then it pays to invest more of your savings in stocks.
3. Put the process on autopilot
The great thing about 401(k) plans is that they make the funding process seamless. You simply tell your employer to allocate funds from each paycheck to your retirement plan, and it all happens automatically.
If you don't have a 401(k) and have been doing your best to fund your IRA at the end of each month, start doing things differently. Instead of spending your earnings on bills and seeing what's left over for your IRA once that's done, set up an automatic transfer so that each time you get a paycheck, you're funding your IRA from the start.
If you're not feeling confident in your retirement savings, you're in good company. But it's also important that you take steps to do something about it. Otherwise, you'll risk struggling financially once your career ends, and that's not a fate you deserve.
