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Retirement derailed: Are your savings on track?

Recent research has uncovered an upsetting trend in financial planning in America: Many Americans nearing retirement are under-prepared. But less studied are the reasons why Americans are so ill-equipped to fund this major life stage.

A recent survey of retired and working Americans ages 50-70 unveiled that the overwhelming majority (90 percent) has experienced some economic or life event that has had a financial impact on their retirement savings goals. The average respondent experienced four of these events, which range from derailers that are beyond their control such as the effects of the recession, to family and lifestyle choices that have lasting financial consequences. In the end, these events set respondents back $117,000 on average.

The most commonly cited derailer, which nearly two-thirds of survey participants report experiencing, is low interest rates that impacted the growth of their retirement assets. Other common derailers include supporting a grown child or grandchild, pension plans that are not worth as much as planned or have been discontinued and bad investments.

It’s impossible to predict which events may happen in the future that could derail your retirement plans, but there are ways to help lessen the impact of unexpected derailers.

Save as much as you can

Nearly three in five survey respondents say they wish they’d started saving earlier. Saving systematically into a 401(k) and other investments as early and often as possible is a great way to prepare for retirement over the long-term. Calculate what you think you’ll need for various expenses in retirement and save accordingly. If possible, save even more than you think you’ll need. Consider setting aside bonuses or tax returns into retirement savings, and increase your contributions to your employer-sponsored retirement plan as you near retirement. If you’re nearing retirement and coming up short, determine how you may spend less and save or perhaps work longer.

Make a budget

Making a budget and sticking to it can be helpful in making day-to-day spending decisions. One-third of survey respondents admit they wish they would’ve spent less cash on extra expenses like eating out and vacations. Though some of these activities can be successfully integrated into your overall financial plan, being prudent with your money is sometimes a matter of making trade-offs now to help avoid having to make them the future.

Maintain an emergency fund

You’ve likely experienced a financial event — such as an unexpected car repair or medical bill — in which you relied on your emergency savings. After you leave the workforce, maintaining an emergency fund is perhaps even more important, yet only 33 percent of respondents are extremely or very confident they can afford such an expense in retirement. Unexpected events are inevitable, but you can prepare for bumps in the road before and during retirement by factoring them into your financial plan and keeping cash on hand.

Purchase the right kind and amount of insurance

Half of retirees and pre-retirees who experienced the death of a spouse or a disability had adequate insurance coverage and were able to maintain their lifestyle — but half did not.

Seek help to develop a written plan

There may be wisdom in seeking professional help. Of those surveyed who have a financial advisor, nearly three out of four report they have a written financial plan, compared with 39 percent of those without financial advisors.


Forrest A. Johnson III is a financial advisor with Ameriprise Financial Services Inc. in Natchez. He can be reached at 601-442-6292 or 319 Main St. in Natchez.