The data keeps flowing in on Americans and retirement, and the numbers aren't good. But for those on the cusp of retirement, there are some essential courses of actions to take to make sure they can survive and thrive in their golden years. They may be a day late and a dollar short, but Americans on the verge of retirement can still salvage a healthy post-work life.
One thing is clear: regrets, Americans have a few when it comes to retirement savings. Of course, take a recent survey conducted by Bankrate, where U.S. retirees said "not saving for retirement early enough" was their biggest regret. Additionally, 52% of U.S. households age 55 and older have no retirement savings at all. As workers grow closer to retirement, they're trying to make amends — but it just isn't enough.
Another study, this one from Boston College, reports that empty nesters are adding to their 401(k) plan amounts, but only by half-a-percentage point, on average. Retirement savings angst is particularly hard on Americans in the later stages of their working years who can clearly see retirement on the horizon, whether they're ready for it or not.
"Individuals entering their final 10 to 20 years before retirement may find the limited time frame sobering, but the truth is, it is never too late to save for retirement," notes Carla Dearing, CEO of SUM180, a Louisville, Kan.-based online financial planning service. "Rather than be discouraged, they should embrace this window of opportunity."
To upgrade that transition into retirement, career professionals with five to ten years left until retirement should take some immediate, critical steps — and do them right now. Here's a checklist, from Dearing and other money management professionals:
Update your retirement plan
"Have a plan that will tell you exactly how much you still need to sock away," Dearing says. "A clearly defined goal is often what we need to galvanize us into action." A good financial plan will tell you, for example, exactly how much you should contribute to your 401(k) this year, Dearing adds.
"For a good idea of that amount estimate, your retirement portfolio — not just your stock portfolio but assets that include real estate and rental income as well — should be 10 to 15 times your expenses in retirement," she says. "Compare that ideal retirement portfolio number to what you currently have saved, and you'll get a general idea of how much you'll need to crank up your retirement savings."
Prepare a cash flow report
A cash flow report will evaluate your assets, expenses, and expected future income to determine if their assets and income will allow for a certain level of spending, says Rebecca Pavese, a financial planner and portfolio manager with Palisades Hudson Financial Group, in Atlanta.
"The report will assume a certain amount of inflation for expenses and a projected rate of return for assets," Pavese states. "Often a financial planner will run multiple iterations to reflect various spending levels, lifestyle adjustments, and market returns in different environments. Once their report is completed, you'll have a general understanding of what you financial future holds."
If cash flow is a problem, downsize your home - Pavese says that downsizing your home is one lifestyle change that can have a major impact on retirement savings.
"If the home is not mortgaged, the proceeds from the sale of will allow for the purchase of a new, smaller home and a deposit into an investment account," she says. "If the home is mortgaged, the purchase of a smaller home can either eliminate this expense or reduce its impact on monthly cash flow. A smaller home in the same area will also reduce monthly maintenance expenses. Lower expenses will, in turn, allow for the need for less income, which can translate into more discretionary income and increased savings."
Bullet-proof your investment portfolio
Jared Elson, a managing partner at Regent Wealth Management, in Morgan Hill, Calif., says the "number one move to make" as you approach retirement is to start reducing volatility in your investment portfolio.
"A dramatic loss in the years leading up to retirement can equal additional years spent working to make up for that loss, rather than enjoying the retirement you have dreamt about," he explains. "Focusing on a low volatility portfolio with consistent returns insures you are ready to retire when you planned on it, rather than having unexpected market downturns sink your retirement plan."
Get some good professional advice, and pay down debt
This one is a "two-fer," from Pat McClain, a senior partner and co-founder of Hanson McClain Advisors, a Sacramento-based financial advising firm.
"At the five-year mark, get a second opinion on your portfolio," McClain advises. "If you have to, reallocate your investments to help protect yourself from huge market swings. Then, start slashing debt before retiring. Money not going out is the same as money coming in. Excess debt and expenses steal retirement dreams. Help that process by finding 20 ways to cut expenses, even if you think you have plenty of money."
Getting close to retirement can be the ultimate "good news/bad news" experience for American workers. But if you're five- or ten-years away from that gold watch, use the time wisely to feather your nest for a comfortable retirement.