The Center for Retirement Research at Boston College found that higher-income households are more likely to underestimate their risk of being unable to maintain their standard of living in retirement. The top 10% of American households by net worth had an average of $1.29 million in their retirement accounts in 2022, almost four times the average retirement savings for all American families. Shockingly, nearly 50% of American households had no retirement accounts in 2022. To maximize retirement income, it is important to supplement guaranteed income sources like Social Security and pensions with investments like stocks and mutual funds to keep pace with inflation.
Social Security was the most common source of retirement income in 2022, but 79% of retirees also had one or more additional sources of private income. To boost retirement savings, experts recommend taking advantage of tax-advantaged retirement accounts, diversifying investments, and optimizing asset allocation based on age. Investing in employer-sponsored retirement plans like a 401(k), or individual retirement accounts like a Roth IRA or traditional IRA, can help increase savings. Talking to a financial advisor can help determine the best path forward based on individual circumstances.
Cutting back on expenses and finding ways to increase overall income, such as taking on a side hustle or finding a higher-paying job, can also help increase cash flow and savings. While reaching the same level of retirement savings as the top 10% may be challenging, living below one’s means and making wise investment decisions can still lead to a comfortable retirement. By being proactive and planning ahead, individuals can ensure they have enough resources to enjoy a financially secure retirement.
In conclusion, many higher-income households underestimate the risk of not maintaining their standard of living in retirement. It is crucial to maximize retirement income by supplementing guaranteed sources with investments, taking advantage of tax-advantaged retirement accounts, and diversifying investments. Increasing cash flow and savings through reducing expenses and seeking additional sources of income can help individuals secure a comfortable retirement. By being proactive and seeking financial advice, individuals can set themselves up for a financially secure future in their golden years.
