Most American workers have a good understanding of many of the steps people are encouraged to take when planning for retirement.
Suze Orman, the well-known personal finance author and media personality, explains some common investing and savings strategies — and also explains what she calls a retirement stress test people can use to evaluate their progress.
Because Social Security monthly paychecks by themselves should not be seen as enough to provide for a comfortable retirement, workers would be wise to have other money moves in progress as they plan for their futures.
Starting to save money as early as possible is a generally agreed upon best practice. The sooner one begins, the more time finances have to grow in value.
Substantial contributions to employer-matching 401(k)s and investments in tax-advantaged IRAs are also effective ways to complement Social Security benefits in retirement.
It is vital to plan for health care costs. Medicare covers many important expenses, but long-term care insurance — which for many is the biggest health care cost in retirement — is often not covered. So it’s important to purchase that coverage separately.
Orman advises that other behaviors such as avoiding debt and creating a budget are key strategies as well.
She offers a warning for current workers and then explains a stress-test exercise people can use to anticipate potential financial vulnerabilities.
Suze Orman explains a retirement stress test to evaluate finances
Orman notes that one common experience many people getting close to retirement age share is that they have likely been dealing with unexpected situations for many years.
This fact means they would have already developed some methods of dealing with adversity. But the finance author cautions people that it can be a different experience when running into financial difficulties after they have already retired.
“Dealing with curveballs in retirement can be tricky,” Orman wrote. “That makes it so smart to do your very best to arrive at retirement in the best possible financial shape.”
