you entering the last chapter of your career and
wondering if your nest egg is where it should be? You’re
far from alone.
In fact, the statistics are
shocking. According to Forbes, just 40 percent of workers were covered
by a workplace retirement plan in 2017. PricewaterhouseCoopers reports
that less than half of baby boomers have $100,000 or more set aside for
their golden years. And Generation X is even worse off, with a median
nest egg of $35,000 according to a recent study by Allianz Life.
“Sometimes people feel that there
is plenty of time to start down the road,” Aaron Kowal, managing
director and senior financial advisor at Waukesha’s Kowal Investment
Group, explains of the sobering stats. “Even in their 40s and 50s, they
say, ‘I’ll start saving later.’ Or they’re just nervous about investing
“I also think it’s
under-education,” Kowal continues. “People in general haven’t been
educated enough in the school system or in their families, because
families don’t like to talk about money. So people make mistakes.”
Boomers and Gen Xers are the
first generations deprived of the comfort of knowing that robust Social
Security payments and a healthy pension will cover them in retirement,
moved by their employers to less costly and more risky products like
401(k)s and IRAs. In addition, Americans are living longer than ever,
meaning Gen Xers and late boomers often simultaneously support aging
parents and adult children even as their own age-related health woes and
costs emerge. And they often need their nest egg to last longer than
Here, Kowal and Jennifer D’Amato,
chair of Trust Services for Reinhart Boerner Van Deuren, share simple,
sound advice on making the most of your retirement savings, whether
you’re an experienced investor or need to catch up.
Don’t Panic. Use Volatility Proactively.
That’s easier said than done when
you realize that there’s no turning back the clock — or if you’ve
suffered bad experiences with past market crashes. Kowal says wise
investors don’t panic and pull out of the market, but rather use its
fluctuations to their advantage.
“The volatility we’ve had
recently is normal volatility,” says Kowal. “The lack of volatility we
had in 2017, that was weird.” The best strategy, he says, is to “put
your blinders on and try not to worry too much. … Businesses are
reporting strong numbers, and entrepreneurs are continuing to innovate.
They need to grow and that’s why they will lead to a better market.
People pay way too much attention to what the fed is doing or what the
government is saying. Businesses are doing well and that makes me
Rather than second-guess your
investments, Kowal suggests embracing the idea that market instability
presents opportunity. “When the markets are bouncing around, a good
mindset to have is, ‘Oh good! I can get something on sale,’” he
explains. “[The market] will always go up eventually. It just takes
patience. The ones who lose are the ones that pull out of the market.”
Just be sure to always buy
quality and time major changes to when the market is on an upswing.
Make Your Employer Plan WORK.
Both D’Amato and Kowal agree that
it’s deceptively easy to believe your employee-sponsored retirement plan
is in good hands and skip the regular check-ins.
“You can’t just assume your
employer’s going to take care of your retirement,” D’Amato says. “No
one’s going to care about you and your retirement more than you should.
So you need to be educated and ask questions. Read some basic books on
investing and on financial planning. Don’t try to do it all yourself,
but educate yourself enough that you’re an informed consumer.”
That goes beyond making sure your
portfolio is performing well.
“For people [who] work in
companies with employer matching, that’s free money that they’re giving
up if they don’t do the match,” Kowal says. “Take advantage of it. It’s
a 100 percent return rate.” In addition, he says, “there are catch-up
provisions in 401(k) plans and in IRAs for people over age 50. And with
each raise and bonus, increase your contribution to retirement planning.
You could build up some serious assets over time.”
Consider A Roth IRA.
Really Consider It.
You can only contribute to a Roth
IRA if you make less than $137,000 for single filers and $203,000 for
married couples filing jointly. In other words, if you’re among the vast
majority of workers. And it could be a lifesaver, if you’re able to pay
taxes on your contributions now, while you still draw a paycheck, unlike
traditional IRAs that allow you to defer paying income tax on your
savings until you retire.
“There are a couple benefits to a
Roth,” D’Amato explains. “They grow tax-free once you pay the tax and
put them aside to work for you. Then you can take out funds tax-free
once you have a Roth IRA for at least five years and you’re
59-and-a-half or you’re disabled or you die. … Another benefit is there
are no minimum distributions, so you don’t have to take anything out.
People who are fortunate enough to be fairly wealthy can actually pass
that [money] on to the next generation and it really can be a
multi-generational income tax shelter.”
There may be no time like the
present to convert, D’Amato adds.
“Given the fact that the market
has been volatile, it’s a good time to think about a conversion, because
if you time the market right and you convert when the market is
relatively low, over a long-term period you’re going to see some nice
growth,” she explains. “If you can pay the tax at a relatively low
valuation, that’s a good deal — if I’m able to do an IRA conversion in
my early 50s and I may not have to pull that money for 20 years. But
you’re going to want to come with after-tax dollars on the side to pay
the tax, so that all of the funds in the Roth IRA can continue working
in that tax-free environment.”
Find an Advisor You Trust.
Do it now, whether it’s through
your employer or an outside firm.
“I don’t think there is any
financial planner or lawyer out there who has a silver bullet for
someone who’s 55 years old and has saved $40,000 for their retirement,
but they’re used to spending $150,000 a year,” says D’Amato. But, she
and Kowal agree, an expert can ease your fears, give you a clear-eyed
view of the future, and make sure you stay on track in terms of smart
investments and realistic spending habits.
“We deeply care about our
clients, but a financial advisor can be a little more objective and say,
‘Here is why we don’t want to do this. Here is where we see things going
and here is how we can plot out decisions in the future.’” Kowal says.
Work Longer Than You Planned.
Even if it’s just a part-time
gig. The additional paychecks and contributions to Social Security and
your employee-sponsored retirement plan are well worth a few lost years
AVOID MONEY MEDIA
It’s hard to ignore bold-type
headlines and gloom-and-doom TV talking heads, especially when you’re
already feeling uncertain. But, Kowal says, you should. “Keep in mind
with the financial media, that their job is to scare you,” he explains.”
You could have the market double and, in a day, so-and-so is coming on
to say why we’re going to enter the worst bear market in a generation.
Their job is to sell advertising. And they sell advertising by scaring
In Short …
“Discipline will set you free,”
says Kowal, “and automation has to be a key part. People who save on a
regular basis — not just that they’re writing checks to an investment
account or moving money over to an investment account, but have money
taken automatically from a paycheck on a regular basis so that they
don’t even touch it — have the most successful outcomes. If you have to
make a positive choice every month, every quarter, every year, to save
for your retirement, the vast majority of the time you won’t do it.”
And if you’re one of those
fortunate people, “most of the clients I deal with are looking for smart
tax-planning ideas,” says D’Amato. “They do have funds and they’re just
looking to maximize on retirement savings. The Roth is a great way to do
that. Make sure you’re diversified and then you basically have to trust
that, even if the market’s up and down, you’re well positioned. When
it’s down, don’t open that envelope. Find a good investment professional
that you have trust and confidence in … and educate yourself enough that
you’re an informed consumer. In my mind your financial advisor, just
like your lawyer or your accountant, is someone you partner with.”