Mid-Course Adjustments To Get you to the Retirement Goal Line

It's no secret many Americans do not have enough retirement savings and income sources lined up to be able to maintain a basic standard of living in retirement. The sobering data from the non-partisan Employee Benefit Research Institute that nearly half of pre-retirees are at risk of running out of money in retirement was really just confirmation of the retirement income fear coursing through many American households.

A Bit of Well-Needed Perspective

Steve Utkus, the head of Vanguard's Center for Retirement Research recently took a deeper dive into the EBRI data and emerged with an interesting, and positive insight: While just 50 percent of American households are currently on track, another 30 percent aren't very short of the goal line: they have at least 80 percent of what is projected they will need to meet their basic living expenses.

The way so much of the news around retirement planning has been cast you'd think we're all in need of a last-second Doug Flutie Hail Mary to save our retirement. Turns out that a sizable portion of folks who are "behind" are facing the equivalent of being down a touchdown (and maybe a field goal) in the third quarter; they're not that far behind, and they have time to rally to pull off the win.

Here are few potential play calls if you are in that 3 in 10 that needs to close some ground between now and retirement:

Focus on 1 percentage point at a time. Push yourself to raise your savings rate by 1 percentage point every year (even better, try 1 percentage point every six months.) Such a "small" adjustment will inflict less pain on your cash flow and that makes it easier to sign up for in the first place. And it can pay off with a big boost in what you manage to save.

Optimize Social Security. Retirement readiness studies tend to base their assumption on retirees taking their Social Security benefit when they reach their Full Retirement Age. (That's actually a bit optimistic, given that about two-thirds of folks opt for early benefits.) As mentioned in a previous post, wait to start your Social Security benefit at age 70 and you can lock in a payment that could be 32 percent more than what you're entitled to at your FRA. That doesn't automatically mean you must keep working until age 70 if that's implausible or unpleasant to ponder. How about tapping other retirement assets prior to age 70 so you can afford to hold off on claiming Social Security?

Consider That Less Can Create More. Vanguard's Utkus is a leading expert on how retirement plan construction can be enhanced and improved to help Americans do a better job saving for retirement. He's all over auto enrollment, target date retirement funds, and the value of auto-escalation. Next week he's on tap to provide witness testimony for a D.C. hearing exploring retirement income solutions within retirement plans. But Utkus had an interesting suggestion on what may ultimately be the best way to close the retirement savings gap: Stop spending so much. From his blog post:

"For all of us, improving retirement readiness has also got to be about changing the broader culture-from one glorifying consumption to one glorifying saving. This cultural shift seems particularly critical to the 3 in 10 Americans who are "close to goal" but need to do more."

That not only might free up more dollars for savings, but it also reduces the standard of living you'll need to maintain in retirement. Something well worth considering when deciding on the right plays to call to close your retirement savings gap.

Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.