With the Republican efforts to overhaul health care essentially exhausted, it’s likely they will move onto another of the President’s priorities: Tax reform. At this early stage it’s impossible to know exactly what impact a Trump administration tax plan will have on Americans’ retirement savings. Answers to that will only come as the White House releases more details on their proposals and Congress begins its debates on the subject. What we do know for sure is that many Americans are not saving nearly enough to retire comfortably and the policies implemented during one presidency—even if it lasts two terms—aren’t likely to change that.
According to the Government Accountability Office, “52 percent of households age 55 and older have no retirement savings” in a 401(k) plan (or similar plan) or an IRA, “and Social Security provides most of the retirement income for about half of households age 65 and older.” These findings are, admittedly, a few years old: The GAO report dates to 2015 and analyzes findings from the Federal Reserve’s 2013 Survey of Consumer Finances.
Still, it’s unlikely the numbers have budged much in four years, and many other reports suggest that amassing adequate retirement savings is a widespread problem. In fact, the National Institute on Retirement Security puts retirement underfunding in the trillions of dollars.
But, let’s say you are among those who have already started saving for retirement. It’s just that you’re concerned about saving enough. How do you know? If you’ve been socking money away for several years (or more) by now, you’re likely off to a good start—especially if you’re still young. If you’re taking advantage of employer-sponsored or tax-deferred retirement accounts, even better. Here are nine other clues that your focused efforts to save for a retirement free of financial woes are bearing fruit:
1. You Don’t Rely On Credit Cards Or Home Equity Loans
One of the best indicators that you’re financially fit is that you don’t use debt to meet your needs. You pay off your credit card balances in full each month and don’t fall back on lines of credit, such as home equity loans, to finance unexpected or large expenses like home repairs or college costs.
2. You’re Actively Saving Outside Of Your Company Retirement Plan
If you’re maxing out your company retirement plan and also capturing additional savings, you’re on a smart financial track towards retirement. You’re not only saving more, you’re also funding different retirement buckets, using a mix of pre-tax and after-tax dollars. This can dramatically help to save on taxes in retirement.
3. You’re Saving Enough, Relative To Your Earnings
It’s simple: the more you make, the more you need to save. You’re making good progress towards retirement if you’re saving at least 10 percent to 20 percent of your earnings (depending upon your age and any potential entitlement to a pension).
4. You’re Not Relying On An Inheritance
Unless you come from a very wealthy family, banking on an inheritance is a risky proposition. Proactive financial planning is the best way to assure your retirement goals. Any potential inheritance merely provides a way to accelerate your life and wealth objectives. It’s the proverbial icing on the cake.
5. You’ve Developed A Retirement Plan
Long-term planning projections help quantify if you’re on target to retire, or what changes are necessary to assure your success. It’s important to update your plan frequently to account for life’s inevitable twists and turns.
