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The path to retirement can often seem daunting, with the end goal appearing distant and difficult to reach. This sentiment has only grown in recent years, as indicated by a recent report on the Economic Well-Being of US Adults, conducted by the Federal Reserve.
According to the study, only 31% of non-retired Americans are confident in their retirement savings' progress – a significant drop from 40% the previous year and the lowest since 2017. However, don't be discouraged. There are various strategies you can adopt today to get your retirement savings back on track.
Capitalize on Company Match Programs
If your employer offers a 401(k) match, it's crucial to contribute enough to secure the full match. It's essentially "free" money that can exponentially boost your retirement savings over time. Remember, every dollar your employer contributes is a dollar less you need to save to meet your retirement goals.
Tailor Investments to Your Goals
Ensure your retirement savings are invested in alignment with your personal goals, time horizon, and risk tolerance. As you accumulate wealth, diversify your portfolio to balance potential risks and rewards. Those further from retirement age could possibly consider placing assets in broad-based, low-cost stock market index funds. These funds offer market exposure, reducing risk through diversification while promising a solid return over time.
Formulate a Comprehensive Plan
"Have a plan!" is not just a catchy phrase – it's a fundamental piece of advice for retirement planning. Your plan should define your retirement goals, map out your financial journey towards those goals, and create a contingency plan for unexpected expenses or changes in income. Regularly revisit and revise your plan to keep your retirement savings on track.
Utilize Health Savings Accounts
Health Savings Accounts (HSAs) are an underutilized retirement saving tool. HSAs are triple tax-advantaged: contributions are tax-deductible, the funds grow tax-deferred, and withdrawals for qualifying medical expenses are tax-free.
The family deduction limit for 2023 is $7,750. In addition to your traditional retirement accounts, such as a 401(k) or IRA, consider incorporating an HSA into your retirement savings strategy.
Preserve Your Retirement Nest Egg
In challenging times, it can be tempting to tap into your retirement savings. However, it's essential to remember that your retirement accounts are for the long term. To weather short-term financial difficulties, ensure you have an emergency fund separate from your retirement accounts. Compound interest is vital in retirement savings, and the larger your nest egg, the more it can grow over time. Therefore, avoid drawing from your retirement savings before you retire, if at all possible.
While the current landscape may seem challenging, remember that your journey to retirement is not a sprint but a marathon. Start by taking small, consistent steps, such as securing your company match and investing according to your goals.
Gradually, you'll find your retirement savings back on track, steering you towards a financially confident retirement.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All indexes are unmanaged and cannot be invested into directly.
Although index funds / exchange traded funds are designed to provide investment results that generally correspond to the price and yield performance of their respective underlying indexes, the trusts may not be able to exactly replicate the performance of the indexes because of trust expenses and other factors.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by FMeX.
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