Those who haven’t saved enough for retirement face two grim prospects: a reduced standard of living in retirement, or not being able to afford retirement at all. This outlook is bleak but as dire as it is interventions are available to those who find themselves in this situation. In many cases, it doesn't involve extreme interventions such as delaying retirement, contributing more, and lowering one’s expectations for retirement to improve retirement readiness.
Power in Numbers
Research shows that combining multiple interventions are more effective than extreme actions taken by themselves. For example, a minimum 6% contribution rate combined with a minimum retirement age of 67 would improve the outlook for a majority of would-be retirees. Likewise lowering one's expectation in retirement coupled with either of the above two interventions would significantly improve retirement readiness for most.
The Most and Least Effective Interventions
The most effective (i.e., most extreme)
- delaying retirement
- contributing more
- lowering one’s expectations
The least effective
- increasing net returns from investing
- using a more aggressive asset allocation
- signing up for increased contributions over time
- starting with a larger amount of savings
- choosing whether or not to invest one’s savings at all
Optimal Interventions For You
It's important to remember that the interventions that may work for one person may not work for the next. Since no two people will have the same needs, expectations, and circumstances there is no one-size-fits-all approach. For example, delaying retirement can be very impactful for one individual, but not particularly effective for another. Retirement planning like most financial planning is very nuanced and requires a personalized analysis of each individual's needs and situation to arrive at the interventions required to improve retirement. Would-be retirees pay the price for not having retirement planning advice tailored for their needs.
No matter how bleak your retirement prospects may appear, it's never too late to turnaround an otherwise unappealing retirement. It starts with acknowledging a problem exists for which you are unable to solve on your own and then partnering with a skilled financial professional that can help build a retirement financial plan based on the interventions needed to not only improve retirement readiness but also achieve a secure and satisfying retirement.