5 Things That Can Derail Your Retirement Goals
Life doesn’t always go as planned. Unfortunately, this is something we see often when it comes to retirement.
Something unexpected (or simply unplanned for) happens, and it derails your retirement goals.
Let’s take some time today to talk about 5 things that may derail retirement goals and what to do if you find yourself facing these sudden difficulties.
#1 Divorce
A divorce can wreak havoc on a 401(k) account and derail retirement goals.
401(k) contributions made while married are considered marital property, which means they are marital property that must be split between the former spouses.
According to the IRS, “If a plan participant gets divorced, his or her ex-spouse may become entitled to a portion of the participant’s retirement account balance. Depending on the type of plan and the amount of benefits, the ex-spouse may have immediate access to his or her portion of those assets or at some point in the future (usually upon the participant’s retirement or death).”¹
In other words, a 401(k) account may be split and divided between spouses.
If you go through a divorce, it means you may lose half of your retirement savings.
[Related Read: What Happens to Your 401(k) after Divorce]
#2 Job Changes
You may derail retirement if you change jobs.
This comes down to several factors, including the vesting schedule.
A 401(k) vesting schedule is the length of time you must stay working for your company for matching contributions to be 100% yours.
Some employees are immediately vested, which means they own the employer match contributions right away.
But many companies have different vesting schedules, which determine how much of the employer match you own, based on how long you have worked for the company.
In addition, you have different options for what you do with the money in your existing 401(k) account.
These choices include cashing out, rolling it over, and leaving it where it is.
The choice you make may derail your retirement, such as cashing out and being forced to pay taxes and penalties.
[Related Read: Changing Jobs? Know Your Vesting Schedule before Quitting]
#3 Health Changes
If you experience a serious health issue, you may be unable to work.
And, if you can’t work, you may miss out on earnings and the ability to contribute to a 401(k).
Unfortunately, if you do not have adequate savings or long-term disability insurance, you may find yourself having to use the money you saved for retirement to cover medical costs.
#4 Not Enough Savings
Some people do not have a realistic goal for retirement.
They contribute to their 401(k) regularly, but they haven’t contributed enough to retire comfortably.
People are living longer (and outliving their retirement savings), and retirement costs are rising.
As a result, many retirees are discovering they don’t have enough money saved.
The 2023 Protected Retirement Income and Planning (PRIP) study from the Alliance for Lifetime Income found:
- 51% of consumers between 45 and 75 feel they do not have enough retirement savings to last their lifetime.
- 32% are not confident they will have enough money in retirement to cover basic monthly expenses.
- 44% are retired currently or retired previously and have gone back to work.²
Set a realistic retirement goal.
#5 Debt
Debt, especially sudden debt, can potentially derail retirement goals.
Let’s say you experience a financial setback, such as falling victim to a scam, and you amass debt.
You may take that debt into retirement with you.
This means you will have to use retirement income to continue to pay down debt.
5 Things to Do to Meet Retirement Goals
When life happens and your retirement goals are derailed, you may be able to get back on track.
These 5 things may help you build back up your retirement savings, so you aren’t too far behind.
1. Boost Contributions
While you are still able, boost 401(k) contributions.
Contribute at least enough to receive the company match.
For instance, let’s say your employer matches 100% up to 6% of your pay.
If you make $40,000 a year and contribute $2,400 (or 6%) for the year, your employer will match this 100%.
This means you would get $2,400 of free money!
But contributing just enough to get the company match isn’t enough.
If you are behind on savings, you need to contribute more than the company matching threshold.
It is also wise to take advantage of catch-up contributions.
Individuals 50 or older are eligible to make catch-up contributions.
The standard 401(k) contribution limit for 2025 is $23,500.
However, those 50+ are allowed to contribute an additional $7,500, bringing their contribution limit to $31,000.
2. Cut Expenses
If your retirement savings get derailed, it may be time to cut expenses.
Saving for retirement is a priority – Netflix isn’t.
Cutting back on non-essentials today can help you have a better tomorrow.
Depending on how derailed your retirement savings are, you may need to make bigger cuts.
You may need to downsize your home or trade in a vehicle.
3. Use Extra Money Wisely
When you receive “extra” money, such as a bonus, gift, or tax refund, do not spend it!
Put it into your 401(k) account so it has time to grow and help you get back on track.
Think of this extra money as a gift to your future self.
4. Take More Risks
If your retirement has been derailed, you may need to take bigger risks.
The more risks you take, the bigger the potential gains may be.
Consider taking risks such as having a diversified stock portfolio.
Take your personal risk tolerance into account.
Do you have time to take some risks? Or is it time to play it safe?
[Related Read: What to Do If You’re Behind on 401(k) Savings]
5. Seek Help
Speaking with a financial advisor may give you back the confidence you need to get back on track.
If you experience a health setback, you’d seek help from a medical professional.
You should do the same when it comes to your financial situation.
401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.
Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance.
With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.
Find out what 401(k) Maneuver may do for your retirement account balance. Click below to book a complimentary 15-minute 401(k) Strategy Session with one of our advisors today.
SOURCES
- https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-divorce
- https://www.foxbusiness.com/markets/inside-americas-retirement-income-crisis
