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Ready, set, retire: Thrivent looks at retirement readiness

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Key takeaways

Set goals

Only 40% of people feel like they've "very much" or “somewhat” been able to achieve their set retirement planning goals.*

Aim high

It's better to overestimate your basic living expenses a little than to not plan enough. The same can be said of your personal goals. Dream and save big now so you don't have to miss out later.

Protect against pitfalls

Consider everything from taxes and market changes to your health and longevity to help you stay financially afloat in retirement.

Anxious about having enough for retirement? You're not alone. According to Thrivent's 2022 Retirement Readiness Survey*, most Americans have mixed feelings about how ready they are for retirement. In fact, only 40% feel like they've "very much" or “somewhat” been able to achieve the retirement planning goals they've set for themselves.

Paying bills, covering unexpected expenses, continuing to build savings and feeling the desire to give back—all with record inflation and financial unknowns in the mix—have made both retirees and working adults feel anxious about planning for retirement.

Americans have mixed feelings about retirement ranging from confident, anxious and overwhelmed

While you may never feel fully ready for retirement, creating an overarching plan can help give you increased clarity on what's most important to you, discover what's possible, set realistic goals and understand the risks you'll need to watch for.

Consider these six steps as you start or continue planning for your ideal retirement.

6 actionable steps to boost your retirement readiness

1. Commit to saving consistently

While there's no single best way to save for retirement, the survey revealed one habit that's the top source of retirement planning satisfaction: saving money from each paycheck. In the survey, all age groups—from current retirees to younger adults—say consistently contributing to their retirement plan is what helps them feel most confident about pursuing their ideal retirement.

Automating contributions to your savings plan can make this easier. You don't even need to think about or act on anything each time you get paid. When you set up automatic transfers, you may not even miss dollars you aren't seeing in the first place.

The key is to put something toward retirement savings on a consistent basis. Even if it's a small amount, it can play a big part in helping you realize your retirement goals.

2. Allocate more of your budget to your future self

Occasionally reviewing your budget may help you uncover automated expenses you no longer need, like unused subscriptions and memberships. Cutting costs that aren’t adding a lot of value to your life is typically easier than cutting things that make a positive difference in your day. (For you, that may be a daily coffee run, while for others, it could be pizza dinner once a week on their family's busy night.) Once you identify some less essential expenses, you can then put this money toward other financial goals that will contribute to your future.

It's also wise to watch out for lifestyle inflation, which can happen when you start to make more money but spend it on discretionary purchases instead of putting it away for your future self. Revisit your budget often with retirement planning in mind to make sure you're putting your hard-earned extra money to good use.

3. Turn your retirement vision into achievable goals

Whether it's traveling the world, volunteering more often, moving closer to family or downsizing your home, it's important to think about how much you may need to save to cover the lifestyle you envision.

20% of the retired survey respondents noted that they are concerned that they underestimated the money they needed for basic living expenses, while another 15% wished they had dreamed bigger while planning for their golden years.

Ask yourself these questions to create a target based on your unique goals:

  • How long do you expect to spend in retirement? You may need less money if you want to work later into your retirement years.
  • Where do you want to live? Your intended lifestyle—whether that's staying where you are or moving to your dream home—may change the amount of "basic expenses" you'll need to cover in retirement. Food, transportation and utility costs can vary between locations.
  • What passions do you want to pursue? Retirement may be a perfect time to travel or spend a few days a week volunteering for your favorite cause.
  • How do you expect to spend your savings? You may be thinking about leaving a legacy through generational wealth and giving to your favorite causes after you pass on. But you also need to think about how you plan to use your savings for yourself and the people you care about. Otherwise, you could potentially run the risk of drawing down your money too fast.

Whether your retirement dreams are big or small, it's helpful to give thought to the money you may need and how you plan to spend it.

What does retirement look like? Consider how many years you are planning, where you want to live, the passions you might pursue and how you will spend your money.

4. Take inventory of what you have today & make a plan to fill the gaps

As you plan for your retirement, don't forget where you are today. Think about the last time you decided to make your favorite dessert: Before starting, you checked which ingredients you had on hand and went to the store to pick up the rest. You can apply the same approach to reviewing your savings and finances.

 Start by assessing your entire financial picture, including:

  • Income sources. Include Social Security, pensions and other sources such as an annuity or whole life insurance contract with cash value.
  • Investments. Look at your assets, including 401(k)s, individual retirement accounts (IRAs) and other savings that may help cover retirement costs.

Estimating your future expenses can give you a baseline and expose any gaps in your plan. When you approximate your income, cash reserves and expenses, it’ll create an opportunity to identify areas where you can improve your plan and adjust.
Not sure if you're on track? Read these target guideposts for saving by your age.

5. Put your strategy through a stress test

Despite your best-laid plans, it's possible for unexpected life changes—as well as swings in the market—to throw you a curveball. Having a solid strategy can make it easier to roll with the punches. You can prepare to handle the ups and downs by working with a financial advisor and considering various scenarios that could derail your retirement plan, like taxes, inflation, your health, longevity and market volatility.

Taxes

According to the survey findings, about two-thirds of retirees say if they had to advise their younger selves on a financial matter, it would be to learn how taxes impact retirement savings. A financial advisor can help you develop strategies to feel more confident about making your retirement plan more tax efficient. While Thrivent does not provide specific legal or tax advice, we can partner with you and your tax professional or attorney.

Inflation

Inflation can significantly influence how people save for retirement. Cycles of rising prices don't last forever, but it's important to factor in inflation as you save for retirement because it can impact your future spending power. It's wise to have plans in place to protect against future periods of high inflation that could occur when you're living on a fixed retirement income.

66% of people surveyed expect to be impacted by inflation by the time they reach retirement.
2022 Thrivent Retirement Readiness Survey

Health

Even if you're in excellent health and make wellness a priority, future health care needs are an important consideration. A surprise medical bill could seriously derail your retirement plans if you haven’t accounted for that possibility. When you factor in the assumption that you or loved ones could face unexpected health-related expenses or need extended care, it can ease some of the anxiety if something does happen. Having protection in place can help you feel prepared, so you can spend more time taking care of yourself and your loved ones in such situations. Additionally, a health savings account (HSA) or insurance coverage can help give you more flexibility and options for paying for potential extended care needs down the road.

Longevity

People are living longer than previous generations. In fact, a person turning 65 and retiring today can expect to spend another 20 years in retirement on average. While it's difficult to anticipate how long your retirement may last, there's something reassuring about establishing lasting income sources to prepare for living a long life. Planning ahead can make it a reality.

Market volatility

The market has had its share of ups and downs over the years, which can be especially challenging if you’re approaching your desired retirement age and don't have time to make up large losses. Market volatility is inevitable, but you can work with your financial advisor to develop a strategy that can hedge against market downturns and reduce your overall risk.

6. Stay on top of your strategy

Your retirement strategy shouldn't involve a "set it and forget it" approach.

Thrivent's survey found that many current retirees who feel relaxed and excited about their retirement follow strategies that focus on consistently building their savings while also providing flexibility for changing circumstances.

Once you're on a fixed income, review your financial goals periodically and adjust as required. Schedule regular meetings with your financial advisor so you can stay on top of changing financial conditions like your career, your family and the economy. Staying flexible becomes even more important as you enter retirement and your focus shifts from saving to spending.

Get started today

It's never too late to plan for the retirement you want. And you don't have to do it by yourself. A financial advisor can be your sounding board and offer proactive guidance to help you feel more confident and excited about your future.

Connect with a local financial advisor to start exploring your options or start on your own by using our Retirement Income Planning calculator to see where you stand.

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*Methodology: This research was conducted in June 2022 among a national sample of 1,500 adults in order to measure their sentiments, financial planning, knowledge, and issues regarding retirement. The interviews were conducted online and the data was broken into three sample groups; Saving, Nearing, and Retired. Results from the full survey have a margin of error of plus or minus 3 percentage points.

Thrivent financial advisors and professionals have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.
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