5 Ways to Avoid Being a Retirement Casualty

by Marc Bastow | February 21, 2013 6:45 am

Many of my Sunday dinner conversations end up revolving around basketball, but this week’s discussion focused on a Washington Post article detailing the latest facts and figures measuring retirement angst and woe[1]. Courtesy of Michael Fletcher:

The story also includes a “National Retirement Risk Index” graphic[2] that you should read, but fair warning: That’s just as depressing.

Unfortunately, the story is hardly new. Tales of American’s inability to plan for retirement — be it because of runaway healthcare costs, a sluggish stock market or employers pulling back on employee savings plans — are a dime a dozen.

But you don’t have to be part of the sob story.

Even the simplest of actions can put you at least with the pack, if not ahead of it, when it comes to planning for that day when you finally hang up your mouse and keyboard. If you’re worried you’re not the least bit prepared, look through this list and see what you’re already doing, and get to addressing the areas you’ve missed.

  1. Put as much money as possible into your 401k. At a minimum, try to contribute up to what your company will match (if your workplace offers a contribution match), and if your personal budget allows, try to max out your contribution limits every year. 401k contribution limits are $17,500, or $23,000 if you are 50 years or older.
  2. If you do have a savings plan like a 401k or an IRA, don’t blow it. Shit happens, sure, but don’t tap into your retirement funds for any purpose that will trigger a penalty[3]. Facing a personal hardship or paying for your kid’s education? You’re fine. Want to open a concept restaurant? Well, you’ll not only be putting your funds at greater risk, but you’ll be eating a big penalty, too.
  3. Open up a brokerage account — especially if you can afford to invest more past maxing out your 401k contributions. They’re simple to open, they’re surprisingly easy to use, and most important, it allows you to invest in a lot of ways you might not be able to access through the limited funds offered by your 401k provider. My own preference is good ol’ dividend stocks — in particular, well-known, steady stocks like these[4] — that provide steady cash as a buffer against market swings down the long road. But you also can get exposure to specific sectors, other income-producing equities like REITs and MLPs, commodities and more.
  4. Health insurance obviously isn’t the same thing as investing in stocks and bonds, but making sure you’re properly insured is, in its own way, a good way to save money — or at least minimize the “X” factor of a major emergency or a long-lasting ailment. If the plans offered by your employer aren’t up to snuff, or if you simply need more, consider supplemental healthcare insurance.
  5. I’ve already advocated for working as long as you can[5], and I’ll recommend it again. It seems counterintuitive, but it provides monetary benefits (the Social Security retirement age is 67; leaving the work force earlier cuts down on your benefits). And personally, I think it yields social and mental rewards, too.

And, as I always say, stay informed.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. latest facts and figures measuring retirement angst and woe: http://www.washingtonpost.com/business/economy/fiscal-trouble-ahead-for-most-future-retirees/2013/02/16/ae8c7350-5905-11e2-88d0-c4cf65c3ad15_story.html
  2. “National Retirement Risk Index” graphic: http://www.washingtonpost.com/wp-srv/special/business/retirement-benefits-timeline/index.html
  3. purpose that will trigger a penalty: http://investorplace.com/2012/11/dont-risk-your-ira-on-greed/
  4. like these: http://investorplace.com/2012/09/5-dividend-stocks-to-retirement-xpm-wag-msft-intc-tgt-wmt/
  5. working as long as you can: http://investorplace.com/2013/01/planning-to-retire-at-55-please-think-again/

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