This week I stood in my mother’s kitchen and she told me that she is worried about her retirement. Her goal is to retire in less than 10 years, and she feels that so much of her ability to have a financially secure retirement is reliant upon a strong economy. My mother — the strongest, kindest, most fiscally responsible person I know — deserves the retirement that she has worked tirelessly for decade after decade. The realization that she might have to make some changes to her retirement game plan I could tell was starting to weigh on her.
My mother’s response to the pandemic is completely understandable. The impacts of COVID-19 have been felt by all of us in ways we’ve never experienced. With people’s lives and livelihoods at such a vulnerable state, what advice am I giving to my family, friends, and clients who want to improve their retirement prospects?
Your Ability to Build Retirement Savings is Not Always in Your Control
Some people fail to realize that their ability to fund their retirement involves a number of factors that can be totally out of their control. These factors include things like the performance of the stock market, which is currently experiencing a period of extreme volatility, with both positive and downward movement. Interest rates are another factor out of our control – because after all the closer you get to retirement, the less risk you want to take with your retirement savings. The Fed has set interest rates effectively at zero to try and boost the economy, making it good time to refinance debt at lower rates, but harder for retirees to earn a rate of return that is lower in risk but will also keep up with inflation and maintain its purchasing power.
Have a Written Financial Plan for Your Retirement
Putting a plan to paper around your retirement strategy is so important! Working with a financial planner to evaluate your income, budget, spending levels, savings, investments can help you understand your options around retirement and execute a thoughtful more successful long-term strategy. Think about what expenses are essential to your retirement needs, and determine what your strategy will be to meet those most important needs. Determine what income sources are going to provide that important foundation for retirement. Understand what you need to do in order to fund your retirement, and have a plan A, B, and C, so you know what you can pivot to and still feel good about if factors that you can’t control derail one version of your plan.
Be Flexible About Working Longer, Saving More or Spending Less
You may or may not have control over the timing of your retirement, but if you do then working a few more years may significantly help you add to your retirement nest egg, or rebuild it if you had to tap into it to pay bills. It can also give your investments more time to recover, and can help you delay claiming your social security, which can increase the amount of your social security benefit. Working longer can also decrease the number of years you will need to rely on your retirement assets when you do retire.
Many of my clients who are still working and nearing retirement now realize that they don’t want to (or can’t work) as long as they originally planned. Others have realized that they don’t want to do the same type of work for much longer, but that they will start actively looking for opportunities to work part-time or in another role that they would enjoy more even if the pay is lower.
I believe that our society is at an impasse and has to come to terms with the impacts of global capitalism and its impact on people and the planet. Although self-reliance is ideal, most of us thrive more when others are also thriving. I would like to see a changing of behaviors and a real shift among people as a whole willing to sacrifice a little of their comfort and privilege, so that more people don’t have to suffer, have the resources they need to survive and thrive, and not feel like they have to go about caring for themselves alone. Our next generation of retirees are part of our communities, and we can help each other start building a more a resilient future by investing more time and energy into the things that make us feel whole, stay more connected, reprioritize the ways in which we consume, and practice much better sharing of our collective resources.