You've probably pictured your dream retirement many times. Maybe it's sailing to new ports on your catamaran or jet-setting to exotic destinations.
Unfortunately, your retirement savings might not match up with that dream lifestyle. And that's especially true when there's the potential for so many speed bumps along your path to retirement.
Many people expect retirement to be the most liberating time of their lives. They finally will have the freedom to do all those things they have been putting off, like exploring new places or taking up a new hobby.
For many, however, those dreams aren't aligning with reality. Social Security is rapidly shrinking and there are estimates it could be depleted by 2034. That could mean a much smaller payout if you're still a decade (or more) from retirement.
If you're counting on Social Security to make up the majority of your retirement income, you might be in trouble. Unfortunately, many Americans do not have enough saved for retirement to make up for the gap.
According to a report by the Economic Policy Institute (EPI), the mean retirement savings of all working-age families headed by individuals between 32 and 61 years old is $95,776. That average may be skewed because of huge retirement readiness gaps between lower-income families and wealthy families. A more accurate and alarming measurement may be the median retirement savings per family, which, according to EPI, is only $5,000.
Right now is the perfect time to dive into what you can do to improve your situation and plan accordingly.
Get realistic about long-term planningIf you are concerned your expectations may not match your retirement reality, give your retirement plan another look and build in some cushion for the unexpected.
Consider your current health and potential healthcare needs. Healthcare costs typically increase with age, according to data from the Bureau of Labor Statistics. For many, it's one of their largest monthly expenses. Ask yourself, have you accounted for increased spending and potential needs?
Also think about your current lifestyle. Are you planning on maintaining it while you're in retirement? If that's your goal, you need to have enough set aside to ensure a smooth transition.
Getting smart about retirementHaving a general idea of what you can live on and your spending potential can help set a baseline for you when it comes to mapping out your nest egg. Once you have the outline of a financial plan, it's much easier to evaluate whether your retirement saving or your retirement dreams need to be adjusted.
Hand-in-hand with setting smart goals is proper planning for the long term. Make sure you take care of the basics such as a living will for health emergencies and a last will. Also check your beneficiaries and know what will happen in the event you or your spouse passes away.
Each of these small yet important steps will help you prepare for any bumps along the road. Working with an advisor who understands your particular situation will ensure you are on the right path toward the retirement you want.