Too Little Retirement Savings?

[dropcap]A[/dropcap]we Retirement!!  Yes, you—Retirement!!  Alas, you have arrived to save me from another performance evaluation from my dimwit boss; relieved me of making another PowerPoint presentation; freed me from the burden of yet another business trip away from my family; carried me away from the soullessness of Main Street; and breathed new life into my meaningful existence.  It is you, Retirement, who have single-handedly done all this for me.  And on a much larger note, it was “I” who made you (retirement) capable of doing this for me.

I know I’m not going to win any poetry, writing, or English Literature awards based on my animation or hyperbole of “retirement.”  But my point is that retirement is what most of us aspire to do one-day…and in a comfortable controlled manner on our own terms.  However, this may not be within reach of the vast majority of U.S. citizens as they approach the age of retirement.  According to a recent LIMRA study, the report shows that the vast majority (more than 50%) of Americans have not saved enough–nor do they have any idea how much they need to retire on.  That really only leaves one option:  To continue working through their so-called retirement years.

Because of this, I wanted to provide you with 5-steps to consider in your attempt to ‘supercharge’ your retirement savings, and give yourself the best chance of redeeming the value from it.


•DCA through all troughs and peaks.  This morning, CNBC (Squawk on the Street) even made a point to DCA.  What is DCA?  It stands for Dollar Cost Averaging…which means to put the same amount of money into your retirement account each pay period regardless of how the market (or your account) is performing.  Why is this so good?  It’s good because is it mindless, you end up purchasing MORE shares of your investment when the value is down, and LESS shares of your investment when the price is up.  Overall, you will have averaged a lower purchase price over the long-term, and it doesn’t require an analysis of the market!  [Dollar-Cost Averaging does not assure a profit or protect against loss in declining markets.  Such a plan involves continuous investments in securities regardless of fluctuating price levels of such securities and the investor should consider his/her financial ability to continue purchases through periods of low levels.]

•Maximize employer matching.  If your employer is matching a percentage of the contributions you are personally contributing to your retirement plan, it would be foolish not to take advantage of this perk.  Find out through your payroll or human resource department what the matching requirements/parameters are, and set yourself up to reap instant benefits from your ‘generous’ employer.

•Diversify your investment allocation and don’t react to market swings.  A well diversified portfolio should have less volatility.  In layman’s terms, that means that your portfolio should not move in lock-step with the ups and downs of the stock market.  And by attempting to eliminate some of the “ups and downs” within your portfolio, it is designed to be on a steadier trajectory towards your savings goals.

•Learn to live on less during your earnings years.  How do you do this?  Maximize your retirement plan savings amount each year by putting as much as the limit of your plan (or as much as can possibly afford).  Pack any extra money each month (i.e. $500, $1,000 etc.) into a side savings account or other savings vehicle to save even more for those golden years.  When you’ve properly implemented these two tactics, your personal disposable income should be feeling a little bit strain to keep up with your lifestyle.  However, you’ve now created a new baseline by which your spending habits might be able to be sustained during the transition to (and during) retirement.  The double advantage of this tactic is to live on less now, and save more for later—and that should make the transition a lot easier.

•Take advantage of your employer’s other tax-advantaged savings programs—FSA, HSA, Profit Sharing, etc.  Many of these benefits allow you to contribute on a tax-deferred basis for future qualified medical, life insurance, and child care expenses.  The nice part is that you can receive the tax benefit immediately during payroll, and not have to wait until a tax filing adjustment.

Again, working with a financial planner and tax professional can help you decide which programs and how much to contribute will benefit you the most.