You may find that your unease about financing your retirement is beginning to increase as the outlook on our economy stays gloomy, and according to a study commissioned by Ameriprise Financial, you are not alone. The New Retirement Mindscape® 2011 City Pulse index examined the 30 largest U.S. metropolitan areas to determine where consumers are the most prepared for and confident about retirement.
The results show that while three quarters (75%) of Americans say they’ve taken steps to prepare financially for retirement, the economic uncertainly that has persisted over the past year may be taking a toll on people’s emotions. A mere 18% of respondents surveyed say they believe they’ll achieve their dreams in retirement, down significantly from 21% who shared this sentiment in 2010. Likewise, when asked how they feel about this stage of life, more Americans express negative feelings than did so last year, including the number who say they feel worried (24% vs. 21%), anxious (21% vs. 17%) and depressed (10% vs. 8%) when they think about retirement.
While it would be great if a boost in confidence came easily, the best way to feel secure about your financial future is to prepare well for it. Though the options and advice available to you can seem overwhelming, and often complex, there are several simple steps you can take if you’re feeling wary about your post-career years:
1. Start with the basics. Deciding to make a plan is the first important step, but before you get too carried away, determine what you will absolutely need to maintain your lifestyle during retirement. Include basics like groceries, mortgage payments and other financial obligations. You may want to make a list of things that you could live without if you hit a roadblock in the future. It’s also important to consider things like rising healthcare costs and cost-of-living increases. Plan for at least 20 years worth of expenses. The resulting number will be the absolute minimum you’ll need to save to finance your retirement.
2. Consider your lifestyle. One of the most enjoyable parts about planning for retirement is deciding how you might spend your extra free time. Though you could just be looking forward to relaxing, you may also decide to move to a different area of the country, travel, volunteer or spend more time with family and friends. Your plans can always change, but creating a list of activities you may pursue is a proactive way to begin your planning process.
3. Determine expenses. Many people get hung up on this step, as it can come with a tough reality check, but the earlier you tackle it, the more time you have to save for your retirement goals. Calculate how much each of the activities you’ve planned for retirement will cost. Think about and include any hidden costs. For example, spending more time with family can include things like buying more gifts as your family grows, travelling to see family during holidays and even things like helping fund a grandchild’s tuition. Be honest with yourself and accurate with your predictions to get the best idea of what your retirement will cost.
4. Set goals. With your list of activities and associated costs, you can determine how much you’ll need to save for retirement and what kind of income needs you will have after you leave the workforce. Remember that though it’s important to be aware of the “big picture,” try not to let yourself get caught up in numbers with commas. Break your retirement income needs down into smaller goals that can be prioritized. Though you may find you have to make some decisions along the way, knowing what your retirement will cost and being able to work toward several achievable goals to begin with will help you feel more at ease as you continue to plan.
5. Track your progress. Like with all goals, it’s important to set milestones and continue to check in and reflect as you go. Keep in mind that a little time and organization goes a long way. Set one day each month to sit down with your finances. Even if your goal still seems far away or if you’ve experienced a setback, you likely won’t regret spending the extra time to review your progress.
If you still find yourself overwhelmed or needing help to stay on track, consider meeting with a professional financial advisor who can help you budget your finances now and plan for the future. Remember that while it may be a bumpy ride to retirement, the surest way to feel confident about what’s to come is to do all you can to plan for it.
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