In 2020, according to a survey by Principal, only a quarter of Americans were confident that they had saved enough money to live comfortably during retirement. It is not surprising that few people are sure how they will get financially in later years, as saving enough for a safe retirement can be a financial challenge. But there are some habits that can help make this happen.
According to the Principal’s study, confident Americans have done two important things to ensure that they are ready to retire to a life without financial worries.
1. Saved a strong emergency fund
Although studies have shown that around 62% of Americans live without emergency funds, the numbers for those who are certain of their retirement provision vary widely. In fact, a whopping 60% of those who feel confident that they have enough to live on after retirement have an emergency fund large enough to cover at least seven months of spending. This is actually more than the recommended minimum fund size, as most experts suggest having at least three to six months of living costs in reserve.
It is not surprising that these Americans are more likely to feel secure with an emergency fund in their later years, since this money means that they do not have to invest in retirement to cover unexpected expenses and that they do not have to rob pension accounts. If you do something wrong, you don’t have to take too much of your savings if something goes wrong.
2. Worked with a financial professional
An emergency fund was not the only thing that confident Americans had in common. The same number, 6 out of 10, had also worked with a financial professional.
Professional financial aid can be beneficial for several reasons. A financial professional can provide advice on creating a comprehensive plan, how much to save for retirement, what accounts to use, and what to invest in money.
If you choose to work with a professional, make sure you find someone with the correct credentials who charges reasonable fees. You can get recommendations from friends and family, or visit NAPFA.org to find a counselor near you. Talk to professionals about the scope of their work and make sure you choose someone you feel comfortable with.
You can also decide that without this kind of support you can create a comprehensive financial plan and choose investments yourself. There is nothing wrong with that. And you can still join the ranks of Americans who are confident that they will have a safe retirement without paying for professional advice. The key is to actually sit down, make an informed plan, and monitor your progress over time.
Take action today to gain more confidence in your retirement prospects
If you want to join the minority of Americans who are confident that they have enough money to live comfortably for their entire retirement, you can start today to achieve that goal. Like the other Americans who believe their future is safe, you can save an emergency fund to survive the 2020 recession or other economic downturns or surprise costs that are emerging. Regardless of whether you work with a financial professional or do it yourself, you can create and execute a plan to carefully save and invest for your future.
It’s worth trying, because the last thing you want to do is spend your later years worrying about running out of money.