You won’t see it on the calendar, and it doesn’t inspire any greeting cards, but National Save for Retirement Week is here again. The goal of this week is self-explanatory, but what does it mean to you? Are you vulnerable to the possibility of reaching retirement without sufficient financial resources? If so, how can you ease this risk?
Let’s look at the “vulnerability” issue first. How prepared you’ll be for retirement — or at least how prepared you think you’ll be — seems to depend, not surprisingly, on whether you are currently participating in a retirement plan such as a 401(k) or an IRA. Consider these statistics, taken from the Employee Benefit Research Institute’s 2014 Retirement Confidence Survey:
• Nearly half of workers without a retirement plan were “not at all confident” about their financial security in retirement, compared with only about one in 10 with a plan.
• 36% of workers say they have less than $1,000 in savings and investments. Of this group, 73% said they and their spouse did not have a retirement plan, compared to just 11% of those with a plan.
Clearly, it pays to contribute to your 401(k) or other employer-sponsored plan, such as a 403(b) or 457(b). And, even if you do have a 401(k) or similar plan, you may want to consider funding a Roth or traditional IRA.
Besides contributing as much as you can afford to your retirement plans, what else can you do to help boost your retirement savings?
For one thing, try to control your debts. It’s not always easy, but try to consistently live within your means and make wise spending decisions. Every dollar you don’t spend on debt payments could be going toward your retirement savings.
While it’s essential that you save and invest for retirement, you can’t forget other objectives you may have, such as helping pay for your children’s college education. Of course, if you’re like the vast majority of people, you don’t have unlimited resources — so working toward two major financial goals at the same time can certainly be challenging. Nonetheless, a college education can still be a springboard to a successful career, so you may well feel that you should do everything within your power to help your kids through school.
How can you balance the two important goals of investing for your retirement and for your children’s college expenses? Your best move may be to start saving for college just as soon as possible — even when your children are quite young. By starting early, you’ll put time on your side, so you can put away smaller amounts each year than if you waited until the years right before your kids head off to school. Consider investing annually whatever amounts you can afford to a tax-advantaged college savings vehicle, such as a 529 plan.
By investing as much as much as possible in your retirement plan, managing your debt load and balancing your retirement goals with other key objectives, you’ll be honoring the message of National Save for Retirement Week.
Doug Drost is a certified financial planner for Edward Jones, 2262 Reno Highway.