Are You Saving Enough?

A recent study, lead by Fidelity Investments Retirement Savings Assessment, found four out of ten retired households report not having sufficient income to cover their monthly expenses. That means that more than 38% of retired households are struggling to meet their monthly needs. Fidelity estimates that a retiree’s income drops as much as 28%, forcing significant lifestyle changes and sacrifices in discretionary expenses.

Based on the study, which included three generations (Baby Boomers, Gen X and Gen Y), Fidelity has suggested a five step plan on how an individual can improve their monthly retirement income and better prepare for retirement. These five steps include a mixture of strategies and can be used whether an investor is working or already retired:

  1. Adjust Asset Allocation – Many investors have improperly allocated their assets and are losing long-term earning potential. The study found that at least twenty-one percent of those surveyed were too conservative with their investments. Are you?
  2. Increase Savings – The study showed individuals saved close to $3,500 in 2011, but were not fully benefiting from their workplace or individual retirement accounts. This is especially important for young investors with a long time before retirement because time increases the potential for their money to grow. Are you saving enough? Salary reduction contributions can be as much as $17,000 in 2012.
  3. Adjust Retirement Date – The average retirement age is 65, but delaying full retirement a couple of years or continuing to work part-time can help preserve assets so they have a better chance of lasting through retirement. Do you have a realistic retirement date?
  4. Draw Retirement Assets in Installments – Although many participants in the Ministers’ Retirement Plan use installment payments to receive regular payments out of their retirement account throughout their retirement years, most retirees in other funds take a lump sum distribution upon retirement, incurring huge tax payments, and then spending off their retirement savings too quickly. Another added advantage for ministers is the fact that installment payments over a period longer than 10 years may qualify as non-taxable housing allowance. Are you planning to draw your retirement out in periodic installment payments?
  5. Tap into Home Equity – While downsizing and expense reduction are key to a financially stable retirement, tapping into your home’s equity could generate income in retirement if needed. Seventy-two percent of the people questioned in Fidelity’s survey own a home and almost one-third of those homeowners have no mortgage.

By implementing and following these five basic steps, an individual should be able to save more for retirement and hopefully become significantly closer to achieving their retirement goals. By following these actions, most Americans will be able to reduce the potential retirement income gap and eliminate the potential drop in their standard of living.  Our goal is to help you reach your goals. If we can be of help in that regards, please do not hesitate to contact the Benefits Board today.

About benefitsboard

Art Rhodes is the President and CEO of the Church of God Benefits Board, Inc. - the administrator of the Ministers' Retirement Plan and the Church Loan Fund, Inc. The corporate offices of the Benefits Board are in Cleveland, TN.
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