3 Reasons to Rethink Your Retirement Plan
Retirement is a time that many of us look forward to our entire careers. It is the reward for a lifetime of work and the time to indulge in hobbies and enjoy much-needed vacations. While everyone looks forward to this seemingly-magical moment, if it is not the ideal time or plan, you may be in a poor financial position and unable to enjoy your retirement as you envisioned. Not sure if your retirement plan is still in line with your future life or financial goals? Below are a few reasons to give your current retirement plan a second look.
1. Your 401k Has Not Grown as Much as You Expected
Decades ago, pensions provided a significant income for retirees who had worked with a large corporation for a specified number of years. Over time, pensions have gone by the wayside, and employers have replaced this option with company matches for 401k contributions. Unfortunately, 401ks require employees to determine contributions. If they fail to consider possible market fluctuations with their funds, they may not be contributing enough to save for their retirement. Now that most pensions are a thing of the past and 401ks are the primary retirement vessel, almost half of American households are finding they will not be able to retire with enough savings to maintain their desired standard of living. If your accounts are not where you expected them to be, it may be ideal to increase your contributions or reconsider what you need for retirement.1
2. You Still Have a Lot of Debt
With the cost of living continuing to go up, your expenses in retirement will continue to rise as well. If you already have a significant amount of debt to pay down, that may make living on your retirement savings even more difficult. While some debt may be hard to avoid in retirement, significant debt, high-interest rates, or debt requiring large monthly payments may derail your retirement plans. If this is the case, you may need to push off retirement a few more years and work hard at paying down your debt to a more manageable level.2
3. You Don't Have a Plan in Place for Major Expenses
While everyone hopes to avoid major expenses, they are, unfortunately, a part of life. Eventually, you may need to buy a new car, pay for a new roof, or upgrade your HVAC system. Ideally, you should tackle as many of these large expenses as you may anticipate before you retire so that they do not eat into your retirement savings. After you have taken care of what you know you will need to take care of, you should also put away more into your savings for possible large future expenses so that you won't need to pull the money out of savings that you are relying on for monthly expenses.2