5 Ways That May Reduce Stress When Saving for Retirement - 401k Maneuver

5 Ways That May Reduce Stress When Saving for Retirement

Whether you regret not saving for retirement sooner or you wish you had more to set aside each year, it’s all too easy to get stressed when saving for retirement.

The good news is, it doesn’t have to be this way.

In fact, a few small shifts in behavior can go a long way to calm nerves and take you from a stressed mess to feeling empowered about your financial future. Keep reading for 5 ways to reduce stress when saving for retirement.

#1 Have a Retirement Plan in Place 

 saving for retirement

Too many investors invest money every month in their retirement plan, forget about it, and hope they have enough money for retirement. 

The trouble with this is, hope is not a strategy

If you don’t have a clear path to where you want to be in retirement, you’re probably not going to end up there.

This may sound obvious, but many people fail to set a plan for retirement. And failure to plan is often a stressor when it comes to saving for retirement. 

With rising healthcare costs, inflation, taxes, down markets, and the financial strain this virus has put on all of us, one thing is certain…

If you don’t have a plan and take action on that plan now, you’re likely not going to have enough to retire. 

Or worse, you’ll end up with so little saved that you might have to struggle to survive, or have to rely on your kids to support you. 

Let’s say you have a $300,000 average balance at retirement and you are making $60,000 per year when you retire. How long are these funds going to last you in retirement? 

Will this give you the retirement you truly desire? For most, the answer is no.

Here’s what you can do today to get a plan in place…

  • Take the time now to create a plan for retirement. If you created a plan years ago, but haven’t followed it, then hit the reset button and start planning.
  • Ask yourself at what age you want to retire. How much money will you need to create the income you’ll need in retirement? Write it down. 
  • Look at how much you’ve saved already compared to what you need, and then figure out how much you need to save each pay period to achieve that goal. Don’t get discouraged if your 401(k) balance is low. The point is you’re doing something now to get on track to have the retirement lifestyle you desire. 
  • If you get stuck or are unclear, reach out to a professional for help sooner rather than later. 

Once you have a plan in place, make sure to review your progress quarterly or at least once a year to ensure you’re on track. 

#2 Focus on the Future, Not the Past

 saving for retirement

If you haven’t been able to save for retirement as planned, don’t beat yourself up. Instead, focus on what you can do today to get back on track. 

If you’re unable to contribute the maximum $19,500 to your 401(k) or $6,000 to your IRA, do what you can to save for the future. Every little bit helps come retirement. 

If you have a 401(k), at least put in enough to get the full company match because it’s like getting free money. 

And, don’t forget, many retirement investment vehicle contributions are pretax. This means your contributions are not counted as income, so come tax time, your tax bill may be lower.  

#3 Regularly Review Your Investment Statements

 saving for retirement

If you trash or dump your investment statements when they come in the mail, you aren’t alone. 

Although reviewing the statement for your 401(k) plan or IRA might not be the most exciting read, it is important that you have a good understanding of the information that is provided to you.

 saving for retirement

Here are 3 reasons you want to make it a point to open and read your statements:

  • See how your 401(k) or IRA is performing.
  • Understand what you are paying in fees.
  • This is the part of your retirement that you control. 

If you have a 401(k), we encourage you to take a few minutes to watch this tutorial on how to read and understand your statement. 

#4 Get Engaged and Educate Yourself

 saving for retirement

If you are stressed about saving for retirement, one of the best things you can do to empower yourself is to get engaged with your retirement investments. 

The more informed you are about what you’re actually investing in, the better decisions you can make for your financial future.

If you aren’t sure where to start, here are a few ways to educate yourself… 

#5 Seek Third-Party Expert Guidance 

 saving for retirement

A May 2014 study conducted over a 6-year period compared those who had help with managing their 401(k)s and those who did not. The study revealed…

“On average, the median annual returns for participants in the study who got Help were more than 3% (332 basis points, net of fees) higher than people who didn’t get Help.”¹

 saving for retirement

Add that up over the years, and 3% higher annual returns just by getting expert help can add up to tens of thousands of dollars you could potentially save

A Morningstar report showed that participants who received expert guidance had as much as 40% more income during retirement versus those who received no help at all.² 

Just think about the difference a potential 40% increase in your retirement income might do for your retirement! 

How much could that be, and how would you use it come retirement? 

It doesn’t matter how much or how little money you have saved for retirement, or how much debt you are carrying…

A third-party expert can help you create a plan to get out of debt, fund your emergency account, and maximize your retirement savings. 

Check out our no-cost guide on The Different Types of Licenses Financial Advisors Have and What They Mean to You .

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Sources

  1. AON Hewitt “Help in Defined Contribution Plans: 2006 through 2012” Published May 2014
  2. David Blanchet, Morningstar Analyst 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”

 

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