Do You Have Gaps in Your Retirement Income?

Periodically along the road to retirement, you need to be sure you are taking advantage of all possible sources to supplement your retirement income. You need to guard against exhausting your financial resources too quickly. However, the truth of the matter is that many people don't save enough for retirement. The more you accumulate now, before retirement, the less you will need to worry about working after you "retire" in order to maintain your lifestyle. Consider these five steps to help map out your route to financial security:

1. Determine Your Retirement Needs and Resources
   With people living longer than ever before, a sound retirement strategy may need to provide you with an income stream that can last anywhere from twenty to forty years. Will your expected income be able to keep pace with inflation over this extended period of time? Even with a 4% annualized rate of inflation, the cost of goods and services will double in about 18 years. With this in mind, you can begin to assess the likelihood that your current assets and savings will meet your retirement income needs. If they appear insufficient, you need to fill in the gaps.
2. Don't Count on Social Security and Your Pension Alone
   In the past, Social Security and a company pension have provided significant sources of retirement income. However, the days of "living off" a pension or Social Security have passed. If you depend on Social Security or your pension alone, you may find your income is going to come up short.
3. Increase Your Personal Savings
   Even minor adjustments to your household budget that reallocate some cash to savings instead of consumption can truly pay off over time, given the wonders of compounding.
4. Take Full Advantage of Your Company Plan
   If you are not already, consider contributing the maximum amount to your employer-sponsored retirement plan. This allows you to take full advantage of pre-tax contributions that accumulate on a tax-deferred basis. In addition, many employers match employee contributions, effectively providing a guaranteed return on your own contributions. Remember, if your employer matches 50% of your contribution, you immediately gain a 50% return on those contributed funds. This is one of the quickest ways to narrow a retirement funding gap.
5. Make Sound Use of Personal Tax-Efficient Alternatives
   Individual Retirement Accounts (IRAs), cash value life insurance policies, and annuities can provide additional tax-deferred savings opportunities.

Put Yourself in the Driver's Seat

Retirement may seem a long way off, especially if you have immediate and pressing financial concerns. However, many people in their prime earning years neglect to build adequate savings. The sooner you begin taking advantage of all your retirement income opportunities, the better off you are likely to be when retirement ultimately dawns. Why not take a few moments to review your retirement strategy? If you begin fueling up on all potential sources of retirement income now, you'll be in the best position to secure a comfortable future down the road.

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