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It may sound like a hard reality, but most Americans are stressed about their retirement. In fact, according to Gallop, 63% of survey respondents were moderately or very worried about having enough money for retirement in 2022. This number was up substantially from 54% in 2019, indicating that financial anxiety is steadily ticking up for Americans.
With inflation on the rise and economic uncertainty looming, you can gain some peace of mind by protecting what you've already saved. Taking a few financially sound and pragmatic steps can help you safeguard your retirement against an uncertain future.
Diversify your investments
You've heard the old adage about putting all your eggs in one basket. While it might seem trite, it's also sage wisdom when it comes to your retirement investments. Diversifying your investments means allocating them to a variety of assets rather than just a few – so your savings aren't tied to one or two asset classes, like real estate or stocks.
Diversification helps you mitigate risk – particularly in the event of an economic downturn – because market volatility generally doesn't affect all asset classes at once. According to Fidelity, the primary components of a diversified portfolio include domestic stocks, bonds, short-term investments and international stocks, while other classes, like real estate and commodity-focused funds, can also be advantageous.
Plan for medical care
Americans are living longer – 30 years longer than just a century ago, according to the U.S. Census. While that's great news, this longevity comes at a cost – a rising cost. According to CNBC, U.S. healthcare costs historically outpace inflation and represent a larger share of the national economy than in other countries.
With that in mind, you can protect your retirement savings by planning ahead for healthcare costs. According to Annuity.org, a healthy 65-year-old couple retiring in 2021 will spend more than $662,000 on healthcare costs in retirement.
Along with practicing healthy lifestyle choices and taking preventative care seriously, you can protect your savings by consistently contributing to a Health Savings Account (HSA), which gives you substantial tax-saving benefits for medical expenses. Another option is purchasing long-term care insurance.
Keep inflation in mind
Unfortunately, even the best-laid retirement plans can be thwarted by the economy – especially when inflation comes into play. While the United States saw inflation levels of more than 8% from 2021 to 2022, according to U.S. Inflation Calculator, historic rates average much lower. That said, any inflation can eat away at your retirement income because it diminishes your buying power.
A good way to protect your savings is to choose investments that outpace inflation. According to CNBC, these can include Treasury Inflation-Protected Securities (TIPS), short-term bonds, stocks and real estate, to name a few. A good financial planner can help you choose the best investments during times of increased inflation.
Work a little longer
With lifespans steadily growing, retiring at 65 is more expensive than ever. That's why planning to work a little longer can help you protect your retirement savings. U.S. News reports working just one year longer can boost your Social Security payments, give you more time to accumulate savings and shorten the period of retirement you'll need to pay for.
Keep in mind that your monthly benefit payment depends on your age when signing up for Social Security, so working a little longer can result in bigger monthly payments down the road.
Create an emergency fund
While you might be laser-focused on retirement savings, saving for a rainy pre-retirement day is also important – particularly during an economic downturn. By having six months of living expenses in the bank, you'll have a safety net to protect against unemployment, unexpected medical costs or any number of life's challenges.
With rainy-day savings in place, you'll be able to avoid withdrawing your retirement savings too early, which come with a hefty tax liability and diminish your retirement growth.
Create a sustainable plan
The average American worker isn't a financial guru, so comprehensive retirement planning can feel overwhelming. That's why it's beneficial to find a professional to help ensure your retirement plan is solid.
B.O.S.S. Retirement Solutions & Advisors offers retirement blueprint services to help you maximize savings and Social Security, minimize tax liability, mitigate risk and create a retirement income plan that works for you. For more information or to schedule a meeting, visit B.O.S.S. or email retire@bossretirement.com.
Tyson Thacker and Ryan Thacker are the President and CEO of B.O.S.S. Retirement Solutions with seven offices throughout Salt Lake City. B.O.S.S. Retirement Solutions is a four-time winner of Utah's Best of State Award.
If you have any further questions about social security, you can speak to one of their fiduciary advisors by calling 800-637-1031.
Advisory services offered through B.O.S.S. Retirement Advisors, an SEC Registered Investment Advisory firm. Insurance products and services offered through B.O.S.S. Retirement Solutions. The information contained in this material is given for informational purposes only, and no statement contained herein shall constitute tax, legal or investment advice. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual's situation. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Our firm is not affiliated with the U.S. government or any governmental agency.
