14 Signs that Your Nest Egg May Not Be Enough For Retirement
For most of us, creating long-term wealth takes time. We’re not the lucky lottery winner who quits their job or the trusting child who inherits millions from a wealthy grandparent. We’re the blue and white collar workers who squirrel away our savings one paycheck at a time, watching our nest egg slowly grow while we punch the time clock.
What happens, however, when your nest egg doesn’t seem like it’s growing much, if at all? You’re adding to your 401(K) program or storing money in a Roth IRA (Individual Retirement Fund), but you feel sluggish as retirement approaches like a freight train.
Working with a financial planner would help you determine if you’re saving enough for when you retire. But in the meantime, there are some signs you can watch out for to clue you into your expanding retirement savings. Here are some of the most common.
1. Thirty Comes and Goes
While there’s no hard and fast rule about when you should start saving for retirement, generally, the sooner, the better. There are also some benchmarks to help you evaluate if you’re saving enough to comfortably quit working in your sixties.
Roughly speaking, by the time you’re 30, you should have enough in your savings to cover an entire year’s worth of income. If you’re making $100,000 and your total savings package is closer to $65,000, you can see how that might leave you short.
2. Employer Match Falls Short
Plenty of financial planners will tell you that you should be saving 20% of your income every time you get paid. Doing so ensures that your savings will grow at a rate conducive to building your retirement nest egg.
However, if you’re not pulling enough of your income into your 401(K) to take advantage of your employer’s full matching percentage, that 20% rule isn’t working. In 2021, the average employer match stood at 4.4%. If you make $70,000, you’d need to save just over $3,000 to secure that free money your employer sets aside. Don’t leave free money on the table, ever! Ensure you get the full match from your employer every time you get paid.
3. Savings Rate is Stagnant
We humans like routine. We don’t mind being spontaneous, but our processes usually fall back on what we do regularly. If you haven’t reviewed the rate at which you’re saving toward your retirement, take a moment to reevaluate where you stand.
A stagnant savings rate can easily cost you dearly by soothing you into a false sense of security. Take an active approach to your retirement fund and make sure your savings rate is both growing and keeping up or exceeding inflationary concerns that may arise in your golden years.
4. Your Current Bills Are a Struggle
In 2022, inflation knocked everyone back a step and caused millions of USAmericans to cut their spending and to lose their ability to save much of anything toward retirement.
If your bills are still a struggle to pay each month, you’re overextending your income and need to cut some of your expenses out. Unused subscriptions, stagnant memberships, streaming platforms, impulse purchases, and other wealth stealers can all get axed in favor of building your long-term wealth. Give your bills a hard look to see where you can cut your spending.
5. High-Level Debt
Debt is the destroyer of worlds. Okay, that’s a bit of an exaggeration, but it can feel like it when your debt is eating away at your attempt to save toward retirement. If you’re stuck in a rut regarding outstanding debt, try consolidating your debt into one monthly payment. This step makes it much easier to deal with all your debt at once, reducing your stress.
Also, negotiating your debt down to a manageable amount might be possible. Getting your debt under control so you can start hacking away at paying it off is the first step to truly being able to save for retirement.
6. Lackluster Emergency Fund
Like most children, when I was growing up, I had no idea what an emergency fund was. Fast-forward thirty years, and I continually resupply my fund to replace any money I had to spend for, you guessed it, an emergency.
Car repairs, children’s school needs, a last-minute trip to take care of personal business; you can handle whatever emergency you have when money isn’t an issue. If you don’t have an emergency fund, build one to hold at least three (if not six) months’ worth of bills. Setting this money aside prepares you to efficiently deal with the unforeseen and still save toward your retirement. Don’t stash away another dime until you fully stock your emergency fund.
7. Unknown Social Security Benefit
The first time I received a Social Security benefit notice in the mail, I had no idea what I was looking at. Now, I look forward to seeing them because I know what I can expect to receive from Social Security when I retire. I’m also a competitive person by nature, so I like to see that benefit go up year after year.
If you don’t know what you can take from social security during your retirement, you’re missing a key ingredient to your savings plan. This money shouldn’t be the bulk of your disposable assets in your golden years, but you definitely want to factor it into your overall nest egg.
8. Lacking a Monthly Budget
I hate budgeting, and the impulse spender in me hates it even more. Thankfully, my partner is great at it, and it helps me remember why we’re working with a budget. Knowing your why may also help you if your budgeting prowess is lacking.
Budgeting is the foundation of financial literacy and saving for retirement. It gets everything out in the open and helps you tackle money obstacles one at a time. If you need a solid budget, find a great budgeting tool online or work with a financial planner to create one so you are ready to retire with something in your nest egg to work with.
9. No Long-Term Financial Goals
Not everyone likes discussing money. Those who don’t have much to work with are especially vulnerable to a bleak outlook on retirement planning. However, if you are actively trying to save for retirement, you need to have some long-term financial goals in place.
Creating wealth takes conscious effort, and you’ll likely miss the mark by a mile if you don’t have a goal to aim for. Retirement isn’t going to get cheaper, and if you’re only halfway to retirement age, your long-term goals would be loftier if you hope to be able to enjoy your non-working years. If you need help figuring out where to start, Forbes has some suggestions that might help.
10. No Inflation Cushion
The Federal Reserve normally expects inflation to rise an average of 2% yearly. This rate means that the prices of goods and services in the US will go up by 2% annually. If your retirement planning doesn’t factor inflation into your savings model, you could fall short on cash later in retirement.
Start planning now for that customary 2% inflation. And do yourself a favor by planning for at least one more large inflationary period during your golden years. By doing so, you’ll have the expendable cash on hand for those extra expenses.
11. Thoughts of Retiring Stress You
Sometimes, thinking about the future can be stressful. This is especially true for those planning to retire in ten or twenty years. As we age, time moves faster, and the years pass by more quickly than ever. For those who love their lives just as they are, contemplating a change as big as retirement can be daunting.
If thoughts of retiring stress you out, take a good, hard look at your retirement planning. Take into account your savings and financial assets, but also give some thought to why you’re afraid to retire. No rule says you have to retire. Warren Buffet is in his 90s and still active in his work and investments. He has no plan to retire, and you don’t have to either. You can discuss your fears with a financial advisor or therapist if you’re overly concerned.
12. You Don’t Look Forward to Retirement
Not everyone looks forward to retirement. Plenty of people have zero plans to stop working and hope to work up until they die. However, giving some thought to your retirement needs can ensure you’re in a good position in case you find yourself in a position where you must retire.
Health concerns can plague our working years as we age, making it harder to work consistently. Sometimes we even have to stop working altogether. If retiring makes you sad or frustrated, speak with your family and a therapist about how you feel, especially as the usual retirement age approaches. They may help you get a handle on how best to proceed.
13. Passive Investment Planning
While you can certainly invest in stocks, bonds, and mutual funds that involve little active interaction, keeping an eye on your investments is a good rule of thumb. As you come closer to your optimal retirement age, your investments will play a vital role in managing your time, costs, and discretionary spending. The more you know about how your investments are doing and how many liquid assets you have at your disposal, the better.
If you take a passing interest in your own investments, don’t be surprised if you aren’t getting the sort of return you’d like to see. To maximize your investment portfolio, take an active approach to knowing where your money’s going and what you can expect as a year-on-year return.
14. Your Home is at Risk
One pitfall retirees can fall into is thinking their home will subsidize their retirement savings and that they’ll sell it if they need to. This isn’t a good outlook. The housing market can change overnight, and a buyer’s market can quickly turn around to create a seller’s nightmare.
You’ve put a lot of equity into your home, and losing thousands in value when the market turns can cost you dearly. If you want your home to be part of your retirement nest egg, speak with a financial advisor for tips on utilizing your property assets best to cushion your retirement savings.
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