One of the things that many of us look forward to is retirement. Even if you don’t plan to sit around all day doing nothing once you reach “retirement age”, you still want to be able to do what you want.
Essentially, retirement is all about freedom. It’s about the freedom to choose your lifestyle, and the ability to quit your “day job” if you want to. As you look toward the future, do you feel confident in your ability to retire?
Americans See Improvement in Confidence — For the Wrong Reasons
A few months ago, CNBC reported on a survey about retirement confidence. The survey, which was conducted by the Employee Benefits Research Institute, finds that American workers are more confident about retirement than they have been in the past. However, their confidence might come from the wrong sources.
First of all, it’s important to note that the increase in retirement confidence is mainly rooted in the fact that property values and the stock market are recovering from the drops seen during and after the financial crisis. Because net worth is increasing on paper, many workers feel as though they are on the verge of a better future.
Unfortunately, this outlook isn’t based on a retirement needs assessment. Many Americans still haven’t evaluated what they will need in retirement, and many of them still have no idea what they need to save up in order to retire. As a result, the increased confidence in retirement might be misplaced.
Additionally, even though retirement confidence has improved a bit, the truth is that it’s still a rather dismal showing. Not a lot of Americans feel they are ready for retirement — with the increased on-paper wealth.
How Do You Feel About Retirement?
The truth is that you are more likely to feel confident about your ability to retire comfortably if you have a plan. Think about your retirement investing plan.
- Do you have one?
- Is it based on your expected retirement timeframe?
- Have you taken into account the fact that you need to think about inflation?
- Are you prepared for market down cycles along the way?
Just having a plan can help you figure out how to move forward. Your retirement plan should include such items as how much you need to set aside each month to reach your goals, as well as plans for asset allocation and rebalancing your portfolio as necessary. Take a realistic approach to your retirement planning, and you will be more likely to feel confident.
Another piece of the puzzle is the lifestyle you expect to live, as well as what you want to do with your time. Some retirees don’t actually “retire” in the traditional sense. Instead of quitting work forever, they decide to work part-time, or start a business, or pursue a less-lucrative (but more enjoyable) career path.
If you know that you have a fallback plan, and if you are ready for the expenses that are likely to come in your way, you can truly prepare for a comfortable retirement — without basing it entirely on how well the stock market is doing this year.