How to Survive a Retirement Savings Setback

Written by , June 3, 2013

How to Survive a Retirement Savings SetbackIf the balances in your IRA and 401(k) accounts are less than they were five or six years ago, you’re not alone. Many Americans are still suffering from lower investment savings and a loss of confidence in the concept of retirement planning as a whole.

But you can’t just throw in the towel and give up with your retirement savings. Yes, suffering a savings setback can be emotionally devastating, and it will certainly provide you with an additional level of challenge in reaching a financially secure retirement.

But if you follow the following retirement advice and tips you’ll have a better chance of reaching your goals.

  • Adjust Your Retirement Expectations. It’s important not to be tied down or limited by what your retirement plans might have been a decade ago. Perhaps you were overzealous or overoptimistic in your predictions of how much you could save and how much your investments would earn each year. Take this time to reevaluate your retirement plans and expectations, and if necessary work to formulate a new retirement plan that’s more realistic in light of your current level of savings. Having a more suitable plan will make it easier for you to come up with realistic and actionable steps you can take to reach it.
  • Consider Your Investment Strategy. It’s easy to attribute your current setbacks to unexpected macro-level issues that affected the market as a whole a few years back. But while that may have been a contributing factor to your losses (and perhaps even a significant factor), your investment strategy likely played a role as well. Were you investing too aggressively? Were you not properly diversified? Were you not invested in suitable asset classes given the time you have until your planned retirement? Remember that making your investment choices is a highly specific and individualized process, and you can’t simply follow what everyone else seems to be doing.
  • Delay Retirement. This is almost certain to be something you don’t want to hear, but it’s better to address the issue head-on rather than simply avoid or ignore it. By remaining in your current job longer, you’ll be able to build up your retirement savings, keep yourself physically and mentally active (and therefore more healthy), and potentially have access to affordable employer-sponsored health insurance for a longer period of time.
  • Change Your Lifestyle. If you’ve suffered a retirement savings setback, you’ll probably need to do more than you had been doing in order to build your retirement savings back up. Take a look at your current level of savings and spending, and identify areas that you can change in order to boost your rate of retirement savings. Many individuals and couples anticipate “downsizing” their lifestyles when they reach retirement – there’s nothing preventing you from doing that before retirement either.
  • Even if you’re not trying to recover a savings setback, keeping in mind this advice can help you keep your retirement planning on track.

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