Even with an escalating fear of going broke in retirement, many in New Jersey are finding it difficult to set aside current funds for future use.
The prospect of running out of money in retirement trumps common fears for roughly two-thirds of New Jersey residents (67 percent), more than the national average of 55 percent, according to the Merrill Edge Report. Fear doesn’t seem to be driving behavioral change. The main trigger for New Jerseyans to start investing for retirement is pretty simple: offer them a 401(k).
For many New Jersey residents, debt and unforeseen expenses get in the way of saving more for the future. When asked what competed with retirement savings, 36 percent of respondents said “unexpected costs.” Costs, like those from Hurricane Sandy, arise suddenly and eat up a significant amount of funds. Although these expenses can be unpredictable, New Jerseyans should prepare by having at least three to six months of living expenses stashed away.
Of course, juggling everyday expenses can make it difficult to plan for the future. Large debts are top financial obligations that compete with retirement savings. Thirty-five percent of New Jersey respondents said paying for a child’s education rivals planning for the future. Oftentimes, families continue supporting their child financially in school, and even after graduation, further postponing retirement investing.
Residents can prepare for retirement costs with a strategy that accounts for their investment objectives, the timing of each objective, liquidity needs and risk tolerance.
Seek to maintain a balance between investing for the future and enjoying the “here and now.” Fortunately, when prioritizing finances, most New Jerseyans focus almost equally on saving for the future (62 percent) and living comfortably today (61 percent).
The expected age of retirement is an ever-changing number. On average, New Jersey survey respondents expect to – or have – retired at 66 years old. An overwhelming majority (85 percent) currently has some retirement investments, yet two-thirds are concerned about running out of money in their golden years. Investing early is key to having enough money to last throughout retirement, but the average respondent in the state didn’t begin saving until age 34.
Retirement investment habits do vary generationally, and Millennials across the nation are investing for retirement several years earlier than Boomers. However, both generations still struggle with having enough.
Pursuing financial goals is an ongoing process that doesn’t happen overnight. Start by formulating a plan with specific goals – including implementing appropriate investment decisions – and strategizing how to get there.
About the Author: Ray Tenpenny is a regional sales manager with Merrill Edge, which offers team-based advice and guidance brokerage services. He can be reached at 908-709-7667.