Simple Strategies for Those Worried About Their Retirement Savings in 2024

With uncertainty surrounding two legs of the stool—DB pensions and Social Security–aspiring retirees have increasingly had to rely on themselves to fund their retirements. While the rise of employer sponsored defined contribution retirement plans has helped to offset the fall of DB plans, the outlook from savers remains grim, and it has many harboring anxieties about their ability to retire comfortably and not outlive their assets. These fears have been further exacerbated by the prospect of taxes, recent market volatility, and persistent inflation. In fact, a recent Gallup poll indicates that 71 percent of nonretired adults are at least moderately worried about being able to fund their retirement. Nonretired Americans’ expectations for a comfortable retirement are the most pessimistic they have been since 2012, falling 10 percentage points since 2021, including five points in the past year.

Despite the pessimism surrounding American’s retirement readiness, many ways exist to help ensure you save enough money to retire comfortably and extend those savings over the duration of your retirement. By following your financial plan with discipline, saving diligently, investing wisely, utilizing various retirement income sources and strategies, and capitalizing on legislation such as SECURE ACT 2.0, you should position yourself favorably for retirement and mitigate concerns related to outliving your assets, taxes, volatility, and inflation.

1. Outliving Your Money

To feel confident you will not outlive your assets, you must first estimate how much money you intend to spend in retirement. Consider costs like mortgage payments, healthcare and long-term care costs, groceries, transportation, travel costs and other expenses necessary to maintain the lifestyle you desire. Once you have a strong feel for your expected expenses in retirement, consider working with an advisor to develop a robust financial plan to help you work towards your retirement goals.

A key component to every financial plan—and retirement plan in particular—is a saving strategy. Your financial plan will outline how much to save each year and where to put those savings to best advance towards your retirement objectives. In the absence of a full financial plan, a solid starting goal is to save as much as you can right now. Can you save 15% of your income toward retirement? This includes 401(k) contributions and any matching from your employer. If you can’t right away, we suggest you slowly work toward that goal. The sooner you start, the more you will benefit from compounded returns, thus allowing for longer-lasting disposable or emergency funds. However, understand that it’s never too late to start, especially in light of SECURE ACT 2.0. Among other benefits, this recent piece of legislation increased catch-up contribution limits for those aged 50 and over to $7,500 in 2023, an amount that will remain in-place through 2024.

2. Tax Expenses

As noted above, a strong financial plan will outline specifically where you direct your savings. It will also specify from which accounts to draw once you reach retirement. Tax-advantaged accounts represent an important tool for retirement planning, as using various types of pre- and post-tax accounts can help to mitigate the impact of taxes over time. By utilizing tax-deferred savings accounts like traditional 401(k)s and IRAs, your contributions are made before tax, reducing your current taxable income. That money can then grow tax-deferred until you withdraw it in retirement, at which point it is taxed as ordinary income. A Health Savings Account (HSA) is another great way to save, receive a tax deduction for contributions, generate tax-deferred growth and even take tax-free withdrawals when used for medical expenses. Roth 401(k)s and IRAs offer post-tax contributions, but you can withdraw the money tax-free in retirement if certain conditions are met.

3. Market Volatility

Personalized investment portfolios are another important element of a robust financial plan. Your customized portfolio should include a strategic asset allocation that aligns with your goals and objectives, including those for retirement. Within this strategic allocation may be a diversified mix of stocks, bonds, cash, and other assets.

Of course, market movements can impact your investment mix and returns over time, so it is important to closely monitor your portfolio and rebalance if necessary. Goals, objectives, and risk and return requirements may shift over time, especially as you approach retirement, so be sure you speak with your advisor about the right asset mix to stay on track to meet your needs.

4. Inflation

As recent history has shown, inflation can arise quickly and remain elevated for long periods. It is therefore important to save with the expectation that the cost of living might be higher in the future than it is today. Assume that your everyday expenses will be higher in retirement than what you’re currently facing.

However, inflation is often accompanied by higher interest rates, as the Federal Reserve uses short term rates as a tool to combat inflation. This may provide an opportunity to lock in attractive interest rates in savings and fixed income accounts as part of your saving strategy, as many savers have done over the past year.

In a retirement saving landscape mired by dwindling Social Security reserves, declining employer support in the form of DB pension plans, and headwinds such as taxes, market volatility, inflation, saving enough for a comfortable retirement can feel more difficult. However, building a personalized, comprehensive financial plan—including saving, investment, and withdrawal strategies—can help to address your concerns and set you on a solid path to achieving your retirement goals.

If you have questions or concerns about the status of your current retirement strategy, then we would love to hear from you.

Thanks for reading.

¹ St. Louis Federal Reserve, https://fred.stlouisfed.org/series/PSAVERT

² U.S. Department of Labor Employee Benefits Security Administration: Private Pension Plan Bulletin

³ Social Security Administration, https://www.ssa.gov/policy/trust-funds-summary.html

⁴ https://news.gallup.com/poll/506330/americans-outlook-retirement-worsened.aspx

⁵ SECURE 2.0 Act of 2022: Overview, Rules, Limits https://www.investopedia.com/secure-2-0-definition-5225115