When you work hard day in, day out, sometimes, the idea of a comfortable retirement can serve as a source of comfort. After all, you may be clocking in late hours every night at the office at present. But in 20 years from now, that effort might result in your ability to retire to a beach house and spend your evenings strolling leisurely with sand in between your toes.
Of course, everyone wants to envision a comfortable retirement. But that doesn't guarantee that financial security will be a retirement reality.
In a recent Nationwide survey, 77% of older Americans who aren't currently retired say they expect to be financially comfortable once their careers wrap up. But only 68% of current retirees claim to be financially comfortable. Furthermore, current retirees report spending over half their retirement income on living expenses, with just 13% left over for leisure purposes.
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If you want to make sure your future self is content as a retiree, you'll need to take steps during your career to make that happen. Here are a couple to focus on.
1. Save early
You may be inclined to wait until your 40s or 50s to start socking money away for retirement. That way, you can spend your 20s and 30s paying off your student loans and saving for a home. But if you wait too long to start funding a retirement plan, you might miss out on years of growth that leave you with much less income for your senior years.
Let's say you're able to earn an average 8% annual return in your retirement account, which is a bit below the stock market's average. Sock away $500 a month starting at age 25, and by 65, you'll be sitting on over $1.5 million. Wait until age 45, and you're looking at a balance of about $275,000, instead.
2. Invest aggressively
Investing in stocks carries risk -- there's no getting around that. But if you're investing for retirement, you may have a decades-long window to ride out bumpier periods and come out ahead financially. And if you don't invest your retirement savings in stock, you might end up seriously short on cash later in life.
Going back to the above example, let's say you save $500 a month over a 40-year period, but instead of a stock-heavy portfolio with an 8% average annual return, your retirement plan gives you a much more conservative 5% return. Rather than enter retirement with over $1.5 million, you'll be looking at about $725,000.
To be fair, that's still a nice amount of money. But it won't give you the same options as a $1.5 million nest egg.
You deserve to join the ranks of happy and comfortable seniors in retirement. The fact that roughly one-third of current retirees aren't financially comfortable should serve as a wake-up call for you to focus on long-term savings from a young age and invest aggressively while time is on your side and you can afford to take on some risk.
