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overcoming retirement obstacles | JustAskFreeman | retirement planning DC, MD, VA

In a 2013 survey of people aged 50 to 70 with $100,000 or more in financial instruments, 90% reported that they had experienced at least one setback in saving for retirement.

In fact, the average respondent had experienced four setbacks with an average loss or missed opportunity of $117,000.1

The future is always uncertain, and as the saying goes, “Life happens.” It would be wise to prepare for the unexpected and react logically rather than emotionally when faced with retirement challenges. Here are some obstacles you might need to overcome.

Surviving market downturns. More than half of those surveyed said their nest egg had been reduced by index losses during the Great Recession.2 Yet another survey suggested that about 50% of workers who were 32 to 51 when the recession started actually showed gains in their retirement dollars during the 2007 to 2009 period.3 This group may have had lower balances when the recession began, and it’s likely that they continued saving throughout the downturn.

Saving too little or too late. To accumulate sufficient retirement dollars to retire at age 65, one rule of thumb suggests stashing away 15% of income starting at age 25. Someone starting at age 35 might need to put away about 30% each year, and the percentage would increase to about 64% annually for someone starting to save at age 45!4 To maximizing your retirement nest egg, you may also need to adjust your lifestyle and control your spending. Once you reach age 50, you are eligible to make additional “catch-up” contributions.

Experiencing a traumatic event. A job loss, unexpected medical expense, death of a loved one, or divorce might make it difficult to save for retirement. Having three to six months of living expenses in “emergency dollars” would prevent you from tapping into your retirement nest egg, especially tax-deferred IRAs and 401(k)s. This is because withdrawals are taxed as ordinary income and may be subject to a 10% federal income tax penalty if taken prior to age 59½.

Balancing college and retirement. When these two priorities compete, many people stop putting aside money for retirement to pay for their children’s educational costs.1 The key is to balance your children’s needs with your own retirement goals and find an appropriate strategy.

The road to retirement is long, winding, and seldom smooth. But with patience and a steady commitment, you could reach your destination regardless of how many obstacles you encounter along the way.

Let me help you get started with a sound retirement strategy today. Just Ask Freeman  1-866-471-7233

1–2), May 14, 2013
3) The Pew Charitable Trusts, 2013
4), September 24, 2012
5), March 4, 2013