What scares you the most when it comes to money? Whether it is retirement, not saving enough or living in debt – your fears may just be of your own making, and it’s high time you overcame them.
Read on as we take a look at some of the most common financial worries and discuss ways to beat them.
Retirement Should Not Scare You, As Long As You Plan for it
“Never being able to retire” is the top financial concern among most Americans, particularly for baby boomers and 45-54-year-olds (According to this year’s survey by GOBankingRates). It is not hard to understand why given that something as crucial as retirement planning is being neglected by many people. According to the same survey, 34% of respondents have no retirement savings at all!
On top of that, traditional retirement income streams seem to be losing their steam. Social Security funds have chances of drying up by 2034 and defined-benefit pension schemes from companies are almost dead. That means, planning for retirement is increasingly falling on individuals’ shoulders. But, that’s not necessarily a bad thing since people would have more individual liberty on where to invest. Unfortunately, not everyone is prepared to leverage the opportunity.
39% of Americans admitted that they do not know what source of income to tap the most after they retire (according to a survey by GOBankingRates). This even includes a large percentage of boomers nearing retirement! Being clueless about retirement planning is like playing with fire. That’s because you may face some of the biggest expenses in your life when you are not working – healthcare, kids’ education and even unforeseen expenses. And what’s to say that these won’t become costlier over time?
The first step towards overcoming uncertainty and retirement anxiety is to put away an adequate amount of income. While everyone’s financial situation is different, at Zacks Investment Management (ZIM), we generally recommend you try to save 20% of your earnings each year. There are various ways you can achieve that target, such as contributing to an employer-sponsored retirement plan (e.g. IRA, 401(k) etc.) and/or setting monthly withdrawal limits to your savings or investment accounts. Investment Advisor Representatives at ZIM guide each client towards a plan (or, a combination of plans) that best suits their individual financial needs.
Are You Living Paycheck to Paycheck?
Even for younger people whose retirement may be years away, getting into a financial discipline is always beneficial. This only gets validated as “always living paycheck to paycheck” is the top financial fear for 35-44-year-olds (found in the GOBankingRates survey).
For all the catching up on lifestyle trends and ‘living in the moment’ mantras, not having a proper savings discipline could crush you when you are retired. Even for the short-term, some emergency cash/cash equivalents must be set aside to cope with unforeseen ‘rainy days.’ According to a published study by Bankrate, “not saving for retirement early enough” topped as the biggest financial mistake among 1,001 U.S. adults surveyed in early May. “Not saving enough for emergency expenses” took the second spot.
So, better ‘save’ than be sorry! By putting money regularly into your savings/investment pot, you won’t be pressured into making major compromises in your living standards when you approach retirement or after. Other things equal, the earlier you start to save, the less you might need to save each month to meet your financial goals.
Do Not Lose Your Sleep Over Market Shocks
Many older people fear losing money in risk assets. That’s understandable. After retirement, many individuals prioritize wealth preservation and so, volatility in asset prices spooks them. That’s why it is important to diversify.
You might want a more conservative allocation as you approach retirement, but that does not mean doing away with equities altogether. While bonds are important for offering down-side protection, exposure to riskier assets such as equity can mitigate inflation risks. In addition, some cash/cash equivalents are necessary to meet urgent withdrawal needs.
At Zacks Investment Management, we create allocations based on a client’s needs and risk appetite. Also, instead of pigeonholing a client’s nest egg under a single ‘cookie cutter’ investment strategy, we strategize to leverage dynamics in the fundamentals of sectors and asset categories.
Bottom Line for Investors
Do not let fear come in the way of a secure financial future. Save enough to strike an effective balance between your current needs and a comfortable retirement.
At the same time, how you diversify your savings among different investments and retirement accounts is crucial towards achieving your financial goals. That is why, at Zacks Investment Management, we place an emphasis on a customized analysis for every client. Based on their individual financial goals and risk tolerance, we build customized wealth portfolio for each client. If you need help understanding how well your current plans align with your financial needs and time horizon, get in touch with us at 1-800-701-9830. We’ll be happy to take your questions and give you a free portfolio review.
In the meantime, check out our retirement guide, “Retirement Made Easy.” This step-by-step guide has useful tips to help you plan for retirement and also gives you a sneak peek into some of our top investment strategies. To get your free copy, click on the link below: