The majority of Americans plan to focus more on their financial stability over their health or wellness in the new year, according to a New Year's resolution survey conducted by Allianz Life Insurance Company. It can be speculated this is a result of one in three people believing we will enter another major recession in 2018.
The people surveyed reported their top financial focus areas in 2018 will be building an emergency fund, paying down credit cards, making a budget, and increasing their retirement savings. The new year is in full swing, so the time to act on these priorities is now. Planning and goal-setting are key, but it’s important to remember success looks different for different people. Depending on your current life-stage and specific needs, here are three steps for building more financial stability in 2018:
1. Think About Longevity While Saving
Did you know Americans are now living an extra 30 years? The Stanford Center on Longevity reports a 30-year average increase in life expectancy in the United States compared to 100 years ago. The good news is, according to a study by Allianz Life called "The Gift of Time," 93% of those surveyed have a favorable view of longer life. While the concept of longevity is relatively new, its implications are far-reaching and important. It’s essential for people to understand that longer life can open up alternatives to a traditional aging narrative. The linear school-work-marriage-kids-retirement track has been the de facto life template for generations. Some may need to adjust their financial strategy to achieve goals that extend beyond a traditional retirement. The result of taking other goals into consideration while saving for retirement is more freedom to try different things and pursue other passions. (For related reading, see: Retirement Planning for a 115-Year Life Expectancy.)
2. Understand the Importance of the Amount of Retirement Income
Sometimes retirement planning can become too focused on saving for the future without establishing clearly defined goals that address the amount of money needed to support a desired lifestyle. One way to avoid this issue is to start focusing on retirement income and determine the actual amount you would need to save over time to withdraw a specific monthly amount throughout retirement.
A great tool for helping with this type of planning is a retirement income calculator. Many of these interactive calculators are available for use online at no cost. All you need to do is enter the amount you think you’d like to withdraw from your savings each month, the assumed average annual rate of return (the annual interest rate is a nominal APR compounded monthly), and the number of years you would like to make the monthly withdrawals. This will give you an estimated lump sum, the amount you need to save to achieve that specific amount of monthly income. Although it may seem obvious, people need to be more precise about this aspect of retirement planning, and retirement income calculators can be a great help.
3. Connect With a Financial Professional
When it comes to creating a retirement strategy, there are lots of reasons to avoid seeking the help of a professional. You're not organized, you don't have enough money to make it worth someone's time, you'll never find someone who understands you. But financial professionals aren't about judging, they're about helping. According to our survey, Americans are open to getting some support, and nearly one-third said they would more likely seek the advice of a financial professional in 2018. If they were given free access, more of those surveyed would choose to work with a financial professional over a therapist or a personal trainer.
Financial professionals can help with everything from basic budgeting to creating strategies that include guaranteed lifetime income options. Regardless of your situation, your finances or your anxiety, there is probably a financial professional who can help you feel comfortable, and who will work with you to create a retirement strategy. The new year is an ideal time to take action, develop a financial strategy for your retirement goals and work toward attaining more financial stability. No matter what the economy has in store for 2018, by implementing these simple steps and being more proactive in how you plan for the future, you can be more confident about dealing with any financial challenges that come your way this year.
(For more from this author, see: Retirement Income Planning Made Easy With the 3-7-5 Strategy.)
cr. https://www.investopedia.com/advisor-network/articles/3-steps-building-financial-stability-new-year/
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