Are you helping or hindering your future retirement security? It may be time to rethink your approach to retirement planning if any of the following apply to you.
Failing to Understand Retirement Income Sources
Too many people believe that Social Security will provide a comfortable retirement. However, the average monthly Social Security retirement benefit is $1,671 for men and $1,337 for women.
1 That's not a lot of money and it certainly leaves little room for extras. According to many financial experts, retirees need about 70%-90% of their preretirement income to maintain a comfortable lifestyle. If you want a better quality of life during your retirement, you will have to count on additional sources of retirement income, such as your retirement plan, personal investments, home equity, or even part-time work.
Saving Too Little
According to a recent survey of consumer finances, the median retirement savings for all families surveyed was just $65,000.
2 If you have fallen behind in saving for your retirement, it is never too late to try to get on track toward a more secure future.
Employer-sponsored retirement plans offer tax benefits, and many employers make matching contributions to their employees' plan accounts. You may also wish to consider opening your own individual retirement account (IRA). An IRA has certain tax advantages that could help you grow your savings.
Try to increase the amount you contribute to your retirement account, even if it is only a small increase. Contributing all or some of any pay raise or bonus to your retirement account can potentially help grow your retirement assets. Moreover, it is also important to contribute consistently, even if you are juggling other major expenses such as buying a house or helping a child pay for college.
Ignoring Inflation's Impact on Savings
Even a low rate of inflation will mean that you will have to pay more for goods and services in the future. One of the most effective ways to protect your retirement savings from inflation is to have a good asset allocation strategy. By investing your retirement savings in different types of investments, you will be able to allocate a portion to investment types that have the potential to grow faster than the inflation rate. While past performance is not a guarantee of future results, historically, stocks have outpaced inflation and produced higher long-term returns than other investments.
Failing to Learn About Investing
Learn as much as you can about investing and investments. The more you know, the better decisions you can make regarding this matter. Try to read up on different types of investments, diversification, asset allocation, and investment risk.
Be sure you understand the details of your retirement plan. Find out how much you can contribute to your plan, the size of your employer's matching contribution (if offered), and when you can change your contribution amount. Read about the investments your plan offers. Each mutual fund offered by your plan has a descriptive sheet and a prospectus, a document that describes the fund's main features. A prospectus also provides important facts about the fund's investment objectives, portfolio manager, and any risks involved or associated with investing in said fund.
Moreover, make sure you also consider the charges and expenses involved. The fund's fact sheet and prospectus, can be obtained by accessing your account at popular.com/401k, under the Performance/ Investment Information section. Analyze these details as well as other information. Read the fact sheet and prospectus carefully before investing or transferring money. Shares, when redeemed, may be worth more or less than their original cost.
Finally, remember to avoid sabotaging your future. Prepare for your retirement through careful planning, a sound long-term strategy, and the input of a financial professional. We are confident these steps can help you reach your retirement goals.
For more information about different retirement strategies available to you, please send an email to our financial expert at educacionretiro@popular.com.
If you have a 401k plan with Banco Popular de Puerto Rico, remember you can rely on our group of experts at TeleBanco Popular® for access or guidance on how to use your 401k digital account at popular.com/401k. You may also call 787-724-3657 (press option 2 twice).
Source/Disclaimer:
1Fast Facts & Figures About Social Security, 2020, Social Security Administration.
2Nerdwallet, 2019 Survey of Consumer Finances.
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The information provided is for educational purposes and for your independent consideration. It does not contain, constitute, or provide individual tax, financial, or investment advice. Moreover, said material should not be considered as a recommendation of any particular security, strategy, or investment product or service. Investments or trading strategies should be evaluated in relation to each individual’s objectives and risk tolerance. Readers are urged to seek professional advice regarding their specific financial, legal, tax, and investment matters. Investment products are not insured by the FDIC, are not deposits or obligations of and are not guaranteed by Banco Popular de Puerto Rico or its subsidiaries or affiliates and may lose value.
Banco Popular de Puerto Rico offers numerous investment alternatives for IRA accounts. You may obtain detailed information at any of our branches to determine which investment alternative is most convenient for you.
