Preparing for Retirement in America

Retirement is something that everyone will deal with at some point, but no one wants to deal with right now. Of course, the idea of not having to clock in at your 9-to-5 sounds great, but retirement is a lot more than that! There’s your anticipated cost of living, housing, monthly expendable income, SSI, and more. However, the biggest thing that will affect your retirement is your savings. How do you prepare for that?

If—like many other Americans—you’ve been worrying about how you’re going to manage later on in life, then this short article is worth reading. Keep scrolling, learn about your options, and put your mind at ease while creating a plan to secure your future!

Retiring in America

There are many different factors that can influence your retirement plans, and location is one of the most important. Places with affordable property prices and low costs of living are plentiful, but may not be the beach house retreat you’d been hoping for. While Florida has remained a popular retirement destination for many years, states with a lower cost of living should also be considered! Long-term financial stability is critical to your stress-free retirement plan.

Many people think that SII payments will be enough to maintain their current lifestyle. However, the average Social Security retirement benefit only provides around $1,620 each month. Experts recommend anticipating an annual expense of $48,716 if you want to live comfortably. Unfortunately, the average SII benefits only come out to a mere $19,440 per year! Most people won’t be able to maintain their current lifestyle on this small of a budget, which highlights the importance of creating a “nest egg” (i.e., retirement savings).

The Worst Way to Save

We’ve all heard of compound interest before: it’s one of the best ways to make your money work for you! However, the most popular saving methods aren’t the most effective ways to save money, especially if you’re still young. The national average APY on a savings account is 0.10%. Roth IRAs, on the other hand, can earn between 7-10% per year. Using a savings account is fine if you want a liquid asset that can be easily drawn upon as needed, but they’re not ideal for long-term savings.

The Best Way to Save

The latest data from Yahoo recommends saving at least $876,879 before retiring. Investing is undoubtedly the best way to maximize your money and hit this financial goal. IRAs are one way to invest, but they’re certainly not the most effective way of doing so. However, with higher return potential comes higher risk. Making riskier investments is fine if you’re in your 20s or 30s since you’ll have plenty of time to recover before retiring. However, once you hit your late 40s, 50s, and 60s, it’s time to start making safer investments.

How to Make Smart Investments

You have three potential paths when it comes to investing: hiring a financial advisor, using a robo-advisor, or doing it yourself. Hiring someone has the downside of immediate and ongoing costs. This may make sense if you’ve already amassed a large savings, but it’s not recommended for everyone. However, anyone can use a robo-advisor!

Robo-Advisors

A robo-advisor manages your money automatically by investing your funds, selling stocks, and adjusting the portfolio on your behalf. They often offer multiple investment options ranging from “safer” to “risky”, making them ideal for people of any age. Services like Acorns allow you to begin with as little as $5! In addition to stock portfolio management, many robo-advisors offer more traditional services like Roth IRAs as well.

However, placing your trust in someone (or something) else isn’t a chance that everyone wants to take. If that’s the case, then you might consider investing on your own. Unfortunately, the stock market as a whole is nearly impossible to predict. If stock prices were easy to predict, everyone would be rich! Fortunately, you don’t have to do things entirely on your own.

Investing on Your Own

Even if you’re going to be managing your finances yourself, it’s extremely helpful to get recommendations and guidance from industry experts with proven track records. Websites like Motley Fool offer stock recommendation services for nearly any financial situation. Some subscriptions will focus on recommending “safe” stocks selected to secure your retirement funds. Others provide riskier investment suggestions that can rapidly multiply your small savings into a respectable sum of cash.

You’ll want to select a service that matches your retirement progress and timeline. Remember, you should play it safer as you get closer to retirement age. It’s also important to note that—unlike robo-advisors—these services won’t manage your portfolio. That part’s up to you; they simply provide expert buy-and-sell recommendations!

Securing Your Future

Whether you’re young, middle-aged, or nearing retirement, today is the best time to begin securing your future. Although saving $876,879 may seem impossible, it’s certainly doable with the proper approach. Consider the various options listed above, compare them to see which fit best for your financial situation, and take the road to retirement from there.