19 April 2012
Fidelity Investments recently completed research showing that American households may experience an income drop of 28% in retirement. They also discovered that 38% of current retiree households report not having enough income to cover their monthly expenses. Kathleen Murphy, President of Personal Investing at Fidelity, did report, however, that Americans have been saving more for retirement recently. She went on to say that she feels additional steps still need to be taken in order to prepare for the future.
Upon completion of this research, Fidelity put together five steps for the Baby Boomer, Generation X, and Generation Y individuals that they feel will make an impact on their future retirement income. The steps are actions that are typically considered when developing and implementing a comprehensive retirement plan.
- Adjusting Asset Allocation - Be sure to invest dependent upon your age. If you are younger and have more time, for example, do not invest too conservatively. You want exposure to stocks.
- Increasing Savings - Take advantage of employer or individual retirement accounts. Research respondents indicated that they saved $3,500 in 2011, but most weren't benefitting from these tax-advantaged/deferred savings plans.
- Adjusting Retirement Date - The average planned retirement age is 65. However, delaying retirement by even a couple of years and working a part-time job can help preserve enough assets to potentially last through retirement.
- Annuitizing Retirement Assets - Take advantage of the guaranteed income stream that annuities have to offer. Fewer than 17% of retirees have annuities.
- Tapping into Home Equity - Home downsizing can be a great option for some retirees. 72% of research respondents own a home and one-third of them have no mortgage. Downsizing can be harnessed to generate income in retirement.
"Most Americans have the potential to get significantly closer to achieving their retirement goals, but they have to take action and consider implementing a mix of these five steps", said Murphy. A very true statement.
You should also consider working with a Financial Advisor. Since they are experts in the field, they will be able to help you properly allocate your investments so that your money works the hardest for you that it can.
It's your retirement. Plan accordingly so that it can be the way you want it to be.
Coffin, Bill. "5 Steps for Baby Boomers, Gen X and Gen Y to Prepare for Retirement." Life Health Pro. N.p., 18 Apr. 2012. Web. 19 Apr. 2012. <http://www.lifehealthpro.com/2012/04/18/5-steps-for-boomers-gen-x-and-gen-y-to-prepare-for#.T5B1NzFQTLM.email>.