How to retire confidently

When it comes to retirement finances, many Americans don’t feel confident about their plans. Over 40% of participants in the Midland National survey gave themselves a ‘C’ or lower on retirement planning. Fortunately, it is possible to boost retirement confidence by taking a few simple steps that can help pave a path to financial security in your golden years.

What are some retirement concerns people have?

With so much uncertainty happening worldwide, it’s probably no surprise to hear that many are concerned about their retirement plan. According to research, many people (particularly millennials) stated they were worried about outliving their retirement savings.¹ It makes sense, considering that humans are living longer. Another big concern among survey respondents? A growing belief that Social Security won’t be available once they retire.

How do you know if you are ready to retire?

Deciding if you're ready to retire involves assessing various aspects of your life, including financial preparedness, personal goals, health considerations, and lifestyle preferences. Each person’s retirement timeline is different, and it can be helpful to weigh your options and seek professional guidance when determining if you’re prepared to make the transition. To help assess retirement readiness, take time to review:

•  Retirement savings, pensions, and income sources
•  Health status and potential healthcare needs
•  Social and emotional readiness
•  Outstanding debt and financial obligations
•  Emotional impact of transitioning from workplace

Preparing for a confident retirement

While we can’t predict the future, there are steps that allow us to be better prepared. To help boost retirement confidence, it’s a good idea to start planning as soon as possible. Here are a few things to help increase retirement readiness and future financial security:

Calculate how much money is needed for retirement

Calculating the precise amount of money that is needed for retirement not only provides a direct goal but also allows a more significant focus on money-saving efforts. Retirees typically need about 80% of their pre-retirement income to cover the standard living expenses of food, housing, and transportation when they leave the workforce, according to the US Department of Labor.² However, when retirement arrives, other goals will likely require additional money, like traveling or moving to a new place. Estimating retirement income needs involves calculating both planned and unexpected expenses and building a retirement budget around this amount.

 Evaluate finances

Knowing how much is needed to retire comfortably is only half the battle. Another important step is thoroughly reviewing income and savings to determine your current spending and how much should be put away monthly to meet each retirement goal. One of the best ways to do this is to build a budget around estimated retirement expenses. Not only will a budget help you to stay on track with your savings, but it will also give a real-time visual of how you’re progressing toward each goal. What better way to boost financial confidence than seeing retirement savings in action? Start by examining bank statements and bills and list what is spent each month. The list should include essential and non-essential expenses. Essential expenses are things like rent or mortgage, groceries, utilities, and credit card and loan payments. Non-essentials are things like TV apps, subscriptions, and memberships. The list of expenses should be as detailed as possible so you can identify places where you might be overspending. Once the list is completed:

• Assess priorities: A budget may need to be tightened to save more money for retirement. To make this easier, prioritize an expense list, then cut out the non-essential items that appear at the bottom. Cutting expenses can be difficult, so try deciding what is more important to you as you work toward retirement.
• Track spending: A budget is a key tool for setting retirement goals, but committing to that budget is essential to maintain confidence. To help you stay on the right path, it's a good idea to track spending regularly so you know where your money is going and can identify any areas of overspending.
• Try a budgeting app: Budgeting apps can help make managing money easier and more convenient. They allow users to gather all of their accounts and bills in one place, manage their finances from one dashboard, and create budgets, savings goals, and spending caps.

Reduce debt

Eliminating debt is crucial to get on track financially and confidently stay there. Most of us have credit card bills or a mortgage on a house that we need to consider when planning for retirement. Adjusting expenses is a really good way to strengthen personal finances and reduce what is owed to lenders. Consider transferring balances to a low-interest credit card to consolidate debt. Expenses like a mortgage, rent, vehicles, and groceries can all be reassessed to reduce the amount spent. Non-essential expenses like dining out, online shopping, and multiple streaming services may also be cut or reduced.

Create an emergency fund

Shore up confidence in a retirement plan by starting an emergency fund. This will protect the money saved for retirement if something unexpected happens. The goal should be to have enough available funds to get you and your family through possible unemployment, injury, or other unforeseen events that may occur down the road. Many experts suggest building an emergency fund equal to six months of living expenses to help get through a financially difficult time.

Consider guaranteeing a portion of retirement savings with a fixed index annuity

Adding a fixed index annuity (FIA) to a financial plan can bring a balanced mix of growth potential and protection to a person’s retirement assets. The money used to fund an FIA grows tax-deferred without being invested directly in the stock market. It may not earn as much interest as a stock market fund, but the loss of money due to market downturns is typically unlikely, which can go a long way toward building financial confidence and peace of mind. Plus, an FIA can generate steady income for retirement – sometimes for the rest of a retiree’s life.

Talk to a financial professional

To help strengthen a retirement plan and boost financial readiness, consider meeting with a financial professional to discuss ways to fill in any income gaps and achieve long-term financial goals. This also provides an opportunity to discuss different solutions, like life insurance, that can help improve financial security for the future and boost confidence for the years ahead.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

1. Factors in retirement confidence, Midland National, January 2023

2. Celebrate your financial independence, U.S. Department of Labor, as of July 2024

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