It is something that will happen to the luckiest in society becoming old enough to retire.
This comes with the notion of being comfortable and cozy in your home, with enough money to last you, giving you the freedom to relax.
However, in the last 10 years, it has become harder for people to save money for retirement, causing more people to retire later in life, or not at all! This is due to issues such as rising bills, job insecurity, and people simply being unwell, and not having the money to put aside.
In simple terms, it is wise to build wealth before you retire, as it allows you to have more financial stability in your older years. If you are just starting on your journey to saving for your retirement, here are some of the most common challenges you are likely to face, and how you can best overcome them!
Lack of Savings
Starting with the most common barriers, most people who are saving for retirement simply don’t have enough money set aside.
It is so easy to underestimate how much money you will need, which can lead to making inadequate savings.
You can grow your income for retirement in a few simple steps. You will need to determine how much money you will need to retire and consult with a financial advisor. They will help you to break this down into a monthly savings goal, which can be automated via direct transfer. You can also ask your employer (if possible) to match the investment, which will help add to the savings pot.
As you become more stable with your savings, it is advised that you increase them. Start small, but stay consistent! Also, look into high-investment savings accounts for your retirement.
High Debt
Most people have debt, especially in 2024.
Though it is common, it is one of the biggest problems you will face when it comes to trying to save money. Credit cards, overdrafts, and other high-interest debts can sweep any money away, leaving minimal wiggle room for savings.
You can look into consolidating all of your high-interest debts into one loan, usually with a lower interest rate, which will help you to pay it off sooner. Or, why not use the strategy of a debt snowball? This prioritizes paying off small debts that have higher interest rates first.
Also, when possible, try to avoid taking on new debt. If you are struggling with this, talk to your bank or credit union for advice.
Lack of Financial Discipline
You only live once, right?
Financial discipline issues are not only seen in younger people; it is a huge hurdle that many people need to try and overcome to build wealth.
You need to make a budget for your expenses and stick to it. Again, if you find this hard, it may be worth talking to your bank about options! You can seek to track your income and look at areas where you can cut back, as well as make a timeline for reaching financial goals.
Lack of Financial Knowledge
One thing to also think about is the reality of most people struggling to grow their wealth because they don’t know where to start. It’s impossible to make informed decisions if you don’t have all the information!
You may need to start looking into investment options, retirement planning, and even tax strategies to help you make the best choices for your decision going forward.
Of course, educating yourself is the key to overcoming this hurdle. There are a lot of videos online and blogs that can help you learn about the world of finance, investments, and other areas like getting a 401(k). Alternatively, you can talk to a financial planner, as they will be better equipped to assess your situation and provide personalized guidance. Try to start with small changes to your financial habits (such as making small, regular investments, such as paying into an index fund. Always seek guidance in this area and pretty soon, you will have your own base of knowledge about how to make every penny you have stretch.
Market Volatility and Economic Uncertainty
A frustrating part of life is learning to accept things that you cannot control.
When it comes to market volatility and economic issues, these are commonplace but you can mitigate against them to build your retirement fund. For starters, don’t panic, as this can lead to poor decision-making and will prevent you from saving for your retirement effectively.
A key way to prevent this from impacting your retirement plans is to avoid making impulse investments or pulling out of an investment, based on market downturns and short-term fluctuations. If you can, try to diversify your portfolio as much as you can. This can look like investing in bonds, stocks, real estate, and so on. This will prevent your retirement portfolio from being impacted by market swings.
If you aren’t sure where to begin with this, contact a financial advisor to help you make the best investments against a struggling or difficult economy.
Some Final Tips!
OK, so carrying on from the realm of things that are not controllable, it is always wise to try and invest as much time as you can into keeping yourself healthy. You don’t want huge healthcare costs when you retire, so try and stay healthy with a balanced diet, seeing your doctor, dentist, and optician regularly, and getting in as much exercise as possible.
As hinted at earlier, it is also a good idea to try and build your retirement fund with the help of tax-advantaged savings accounts, such as an IRA, a 401(k), or a HSA. As is the way with any type of investment, be sure to reassess these regularly, as well as your overall plan for savings, to make sure they align with your needs, a changing income, or just the market in general.
Remember, when it comes to saving for retirement, little and often is more effective than making huge payments into any account. So, if you need help, talk to a wealth management team!
