9 signs your retirement is on the right track
Nearly three-quarters – 73% – of American workers surveyed say they are “fairly confident” that they will have enough money to live comfortably in retirement. This includes 28% who are “very confident” that they are on track for retirement, according to the 2022 Retirement Confidence Survey conducted by the Employee Benefits Research Institute (EBRI) and Greenwald Research.
Meanwhile, a third of workers and 24% of retirees surveyed are less confident they are on the right track due to the COVID-19 pandemic, according to the same survey. More than 2,600 adults, aged 25 and over, were surveyed to arrive at the results.
No matter which group you land in, staying on top of your retirement planning and progress is essential to ensure you have enough money for a comfortable retirement.
Wondering if your retirement planning is going as it should? Here are signs that your retirement is on the right track.
1. You save enough for retirement
If you plan to work until age 65, you’ll need to produce 20 to 30 years of income throughout retirement, says Tom Martina Certified Wealth Management Professional with Vaylark Financial Services, a financial planning firm in Hartford, Connecticut.
“If you need $75,000 a year to survive today, you’ll probably need $1.5 million to survive to age 85 or $2.25 million to survive to age 95. says Martin. He tells Money Talks News that if someone’s Social Security has to pay $24,000 a year, that could be $500,000 of the $1.5 million needed to cover costs until age 85.
If you have a funding shortfall, Martin suggests increasing retirement account contributions, cutting expenses, and/or scrambling to earn more.
“If you’re behind on your retirement goals in your 50s, you might want to give serious thought to not claiming Social Security until age 70,” says Martin. “By not claiming social security [until age 70]you can work into your 60s without worrying about reduced Social Security benefits and increased Social Security payments. »
2. You have automated retirement savings
If you’ve automated your retirement savings and set them to grow each year, you’re probably well on your way to preparing for retirement, says Andrew Rosen, Certified Financial Planner and President of diversified LLCa financial planning firm with offices in Delaware, Pennsylvania and Alabama.
“By automating your savings, you are prioritizing saving for your retirement,” Rosen told Money Talks News. “Adding an automatic increase ensures that you’ll adjust this savings amount each year for inflation. It’s still important to check how you’re saving, but automation takes the guesswork out of saving for retirement and makes it a habit.
To stay on track for retirement, Rosen suggests increasing automated contributions to your retirement accounts by 1-2% each year or 25% of any annual increase received.
3. Most or all of your debt will be paid off
Will you no longer have a mortgage, credit card debt, car loan or student loan when you retire? If so, that’s a positive sign that this important part of your retirement is on the right track.
On the other hand, retiring with debt means you’ll have monthly payments that eat into your income. You may even need to work part-time or withdraw additional funds from your retirement account.
“To go into debt in retirement, you need income to pay for it,” says Martin. “That extra income can erode your Social Security benefits, whether through taxes or reduced benefits.”
4. You plan for anticipated retirement costs
The amount your retirement will cost you will vary greatly depending on your retirement lifestyle.
“Find out how much it will cost you annually for food, lodging, transportation and entertainment,” says Martin. “Also be sure to price any retirement activities such as travel, golf or boating and factor in inflation.”
“Normally, inflation is not really a concern. However, when it gets out of control like it is today, everything can cost a lot more and that hurts retirees,” adds Martin. “Although we cannot predict periods of excessive inflation, it is important to consider minimum inflation each year.”
5. You have financial skills
If you have a budget and track how much you’re spending, saving and earning and are ready to look at your debt and come up with a plan to reduce that number, you’re already financially savvy to some degree, according to Rosen.
“Financial literacy is a key part of retirement planning, and the sooner you start to feel comfortable with your finances, the better prepared you’ll be for retirement,” says Rosen.
“By frequently checking and monitoring your progress with your budget, savings, retirement account, debt, and financial plan, you’ll notice if something is wrong,” he adds. Rosen suggests reassessing both short-term and long-term financial goals after major life changes, such as moving, having a child, or getting divorced.
Rosen says these frequent check-ins are important to keeping your retirement on track. They give you the opportunity to catch and correct current problems and ensure that your finances don’t go in the wrong direction.
And, of course, by subscribing to Money Talks News Newsletter will bring the latest retirement news and advice to your inbox.
6. You have a sufficient emergency fund
Having a fully funded emergency account is another sign that you’re on the right path to retirement. This money is essential to enable you to weather any financial storm, such as job loss or medical crisis, without going into debt or dipping into your retirement accounts.
“Not only will you need an emergency fund, but also a cash fund where you will have access to your money,” says Rosen. “If you make it a habit of having access to cash that is available but not intended for everyday use, you will be better prepared to manage your financial situation in retirement.”
If you don’t have an emergency fund yet, see: “9 tips for starting an emergency fund today.”
7. You review retirement account statements
Never looking at your retirement account statements is a ‘recipe for disaster,’ says Chris McMahon, president and CEO of Aquinas Wealth Advisors, a financial planning company located in Pittsburgh, Pennsylvania. Still, some people go years, even decades, without checking their retirement account statements, he told Money Talks News.
“Often these statements will provide additional guidance such as performance relative to the market or level of risk relative to most people your age,” he explains. “In short, these quarterly reminders can have a huge positive impact on where you might end up in retirement. In the quest for a safe and comfortable retirement, your plan statement is worth gold.
“If your account contains a lot more stocks than average, you may be taking on more risk than you think,” McMahon adds. “Be sure to check the performance breakdown of the individual holdings in your account shown on your statement. If one of your holdings is performing significantly worse than the others, this could be a red flag to consider replacing that holding.
8. You plan your future taxes
To stay on track for your retirement, be sure to anticipate future tax increases.
“Federal income taxes are expected to rise at the end of 2026,” Martin says. “If you are in the 24% tax bracket today, you will be in the 28% tax bracket in 2026.”
Roth Conversions can be a way to avoid future tax increases. By transferring money from a Traditional IRA to a Roth IRA, you will pay taxes on the money at today’s rates. Then the money in a Roth account grows tax-free and can be withdrawn tax-free in retirement.
“The more taxes you have to pay, the more aggressive retirees will have to be with withdrawals from retirement accounts,” Martin notes. “That, in turn, will cause more Social Security to be taxed, which will increase the likelihood of running out of money.”
9. Retirement worries don’t disturb your sleep.
If you’re confident enough in your retirement plans to fall asleep when your head hits the pillow, that’s a sign your retirement is probably on the right track, according to McMahon. Listening to your inner voice gives you insight into the steps you may still need to take to plan for retirement.
If you’re wondering if you’re okay, have enough money, or need to rely on your kids after you retire, it’s your inner self that’s pushing you to address the issue, McMahon says.
“Often people who realize they can fail just ignore the problem,” he adds. “They rationalize, hijack and divert conversations away from any real conversation about preparing for retirement.”
However, those on the right track tend to review and refine their plans regularly. They are happy to discuss the subject and are open to suggestions on methods to improve their chances of having a fulfilling retirement.