Many pre-retirees feel that they are missing the mark when it comes to retirement planning. According to a study by Fidelity, roughly 55% say they are in “fair” or “poor” shape when it comes to covering essential expenses in retirement like housing, healthcare, and food. However, by taking the right steps, you can work toward becoming retirement ready.
Black Enterprise consulted Certified Financial Planner Ivory Johnson, founder of Delancey Wealth Management. Here are some of his tips.
Assess your debt load. One red flag that you’re not ready to leave the workforce is having a lot of debt. Says Johnson, “the biggest sign is when you have a big mortgage. If you have a mortgage that is going to last throughout retirement, maybe because you’re paying for education and you took out money from the house, that’s a fixed expense. So if you have $2,000 a month that you have to pay, that’s $2,000 a month that could be going into your retirement account. If you find that you have a lot of debt, like credit cards, that shows you’ve been spending more than you’ve been bringing in while you were working. So how can you pay all of your bills when you’re not working?”
Get savings on track. If you haven’t made an effort to put money away in emergency savings, start now. “You’re also not ready to retire if you’re not saving. If you’re just living check-to-check, that’s a sign. You have to ask yourself how you’re going to realistically be able to retire if you’re in this situation,” says Johnson. The Fidelity survey showed that 40% of respondents are saving less than 6% of their salary. This includes an employer match to a 401 (k) or other workplace savings account.
“If you’re really behind and you want to retire, even at the expense of your current lifestyle, then you’re going to have to put at least 20% away,” says Johnson.
Set a goal. Decide what your priorities are. For example, is retirement at a certain age important to you? “Find out what your goals are and what you are trying to do. If it is your goal to retire at a certain age, you have to decide what you want to give up today. Then you have to sit down with a financial planner,” says Johnson.
Stay tuned for Part 2 of this interview.