Don’t Let Retirement Spook You

With Halloween just in our rearview mirror, it’s not too late to unveil some scary retirement stats. My hope? That you’ll be spooked into making positive money moves before your future sneaks up on you.

The scary truth: According to the August 2021 Federal Retirement Thrift Investment Board meeting minutes, only 73% of Blended Retirement System TSP active-duty participants were contributing the 5% to the Thrift Savings Plan necessary to get the full match. That means nearly a third are leaving free money on the table.

• If you’re spooked: Find a way to make a 5% — or bigger — contribution to the TSP part of your financial routine. You might have to cut back or cut out other expenses to make this a reality. However, it might be as simple as allocating “found money” in the form of time in service pay increases, promotion raises, the upcoming cost of employment increase … or a portion of your advance child tax credit payments. Make it happen.

The scary truth: Each year for the last couple of decades, the Employee Benefit Research Institute has conducted what it calls a Retirement Confidence survey. In 2021, only 27% of respondents were “very confident” that they would have enough money to “live comfortably throughout their retirement years.”

• If you’re spooked: Start saving for retirement today. It doesn’t take a lot to get the ball rolling. Whether you’re covered by the Blended Retirement System or not, you can participate in the aforementioned TSP. You can contribute as little as 1% of your pay by signing up at myPay or through your service’s payroll provider.

The scary truth: Throughout the pandemic, I applauded the boost to the savings rate tracked by the Bureau of Economic Analysis. However, it’s gotten worse in recent months. The most recent number tracking at 7.5%. Retirement is just one savings goal, but there are probably a lot of others, and 7.5% is not likely to get the job done.

• If you’re spooked: Yes, start saving today.

The scary truth: According to the Boston College Center for Retirement Research’s January 2021 National Retirement Risk Index update, 49% of working households are at risk of a reduction of lifestyle when they retire. That was an improvement from the original research, but still not a good-news story.

• If you’re spooked: Map out your own retirement plan. What will it take to live the life you want to lead and do what you want to do? There are plenty of online tools and calculators like the ones at usaa.com/goals to help you out. Start planning today.

The scary truth: Speaking of maintaining your lifestyle in retirement, how far would $1,543 take you? That’s the average Social Security retirement benefit in 2021. You’ll probably need a lot more.

• If you’re spooked: Don’t rely on Social Security alone to fund your retirement. Be sure your plan includes multiple sources of income. Pensions, employer retirement plans, IRAs, annuities, real estate and non-retirement stocks, bonds, mutual funds and exchange traded funds are all options to build on and not rely solely on Social Security.

The scary truth: Employer retirement plans like the 401(k), or the military’s Thrift Savings Plan, are a mainstay for retirement saving. A June 2021 report by Vanguard Investments pegged the average account balance of participants at $129,157.

• If you’re spooked: That could be a pretty impressive number if you’re 28, not so much if you’re 58. Find out where you stand today. If you’re just starting out, focus on good retirement savings habits. If you’re further down the road, it’s time to identify your savings goal … My guess is, it’s substantially more than $129K.

Spooked into action? I hope so.

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