In a 2013 survey of people aged 50 to 70 with $100,000 or
more in investable assets, 90 percent reported that they had experienced at
least one setback in saving for retirement. In fact, the average respondent had
experienced four setbacks, with an average loss or missed opportunity of
$117,000.
Surviving market
downturns: More than half of those surveyed said their assets had been
reduced by market losses during the Great Recession. Yet another survey
suggested that about 50 percent of workers who were ages 32 to 51 when the
recession started actually showed gains in their retirement accounts during the
2007 to 2009 period. This group may have had lower balances when the recession
began, and it's likely that they continued saving throughout the downturn,
which might have helped them benefit when the market started to improve.
Remember that all investments are subject to market fluctuation and the
potential for loss.
Saving too little or
too late: To accumulate sufficient assets to retire at age 65, one rule of
thumb suggests saving 15 percent of income starting at age 25. Someone starting
at age 35 might need to save about 30 percent each year and the savings
percentage would increase to about 64 percent annually for someone starting to
save at age 45!
If these percentages seem unrealistic, consider that any
savings increase is better than none. In addition to maximizing your retirement
contributions, you may also need to adjust your lifestyle and control your
spending. Once you reach age 50, you are eligible to make additional
"catch-up" contributions.
Experiencing a
traumatic event: A job loss, unexpected medical expense, death of a loved
one or divorce might make it difficult to save for retirement. Having an
emergency savings account that could help cover at least three to six months of
living expenses would put you in a stronger position. If possible, avoid
tapping your retirement savings, especially tax-deferred IRAs and 401(k)s,
because withdrawals are taxed as ordinary income and may be subject to a 10
percent federal income tax penalty if taken prior to age 591/2. When your life
returns to normal, try to save as much as possible at the highest contribution
rate you can afford.
Balancing college and
retirement: When these two priorities compete, many people — 15 percent,
according to one survey — stop saving for retirement to pay for their
children's educational costs. A wide variety of college funding options are
available, but there is no "scholarship" for retirement. The key is
to balance your children's needs with your own retirement goals and find an appropriate
strategy.
The road to retirement is long, winding and seldom smooth.
But with patience and a steady commitment, you could reach your destination
regardless of how many obstacles you encounter along the way.
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