Retirement Investing Challenges
If you ask most Americans about their biggest financial challenge, retirement planning is usually near the top of the list. Although most people instinctively know they should start saving for retirement sooner rather than later, the struggle of daily life makes it harder to commit, especially at a younger age.
Believe it or not, retirement is still a new concept by historical standards, as people have only been "retiring" for about 150 years.
With the rising cost of living, retirement planners face an uphill battle to save enough money for their golden years, especially if they want to maintain their lifestyle. Below is a rundown of the three biggest retirement challenges many Americans seem to be experiencing.
Being Unable to Maintain Pre-Retirement Lifestyle
If you are reading this, statistically speaking, you are unlikely to maintain your pre-retirement lifestyle once you stop working. It is generally accepted that a household needs 80% of its pre-retirement income to maintain its lifestyle after the primary breadwinners have stopped working. But with life expectancy increasing and people putting off retirement planning until later, hitting that magic number is extremely difficult.
Rising Healthcare Costs
As we get older, healthcare takes on even greater importance-and a bigger chunk of our savings. With health expenses skyrocketing, being able to fit health healthcare into your retirement savings plan is becoming more difficult. According to Fidelity, a couple who retired in 2018 would need $280,000 for healthcare expenses during retirement. That figure has grown 75% since 2002.
Working Low-Paying Jobs
Although many Americans tend to earn more money as they age, that's not always the case. Research shows that many American are stuck in low-paying job right up to retirement, especially if they've been unemployed for any length of time. According to The Wall Street Journal, people over 56 see their income decline by 27% if they accept a new job after being unemployed for more than a month.
Solving the retirement conundrum is no easy fix, but there are a few strategies that can help you meet your goals so that you're not relying on Social Security in your golden years:
- Save 15% of your income. The earlier you start, the better. If you're over 35 and don't have retirement savings, you'll need to set aside more money.
- Work longer. We live in the digital era, which means there are a lot more opportunities to work from home and pursue interests that pay a decent amount of money (even as a side gig). Many retirement planners say that most of us would benefit from working a little bit longer-at least until hitting full retirement age.
- Invest intelligently in growth and risk-off assets. Your portfolio should have a good blend of growth stocks and risk-off bets to account for a volatile economy.
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