I am in my 30’s and am contributing to a 401(k) through my employer. Maybe I’m just paranoid, but I have a feeling in the next 30 years there is a decent chance of some sort of financial collapse. What types of protections are in place to help ensure that the hard earned money I am saving is still going to actually be there for me when I retire in another 3 decades or so?
How Can I Be Sure My 401(k) Will Still Be There For Me In Retirement In 30 Years?
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1.) Have a clear picture of what retirement means to you - does it mean travelling and dining out often? If so, your fund will need to be large enough to accommodate that. If it looks more like fishing and working part time, then perhaps your fund can be a little more modest, and still be fine. But if you do not know, "People without vision perish," as the Proverb goes.
2.) Pay close attention to how your 401k is performing. If you don't know what it is doing, you are right to worry. While I do not recommend knee jerk reactions to losses, trends are worth paying attention to, especially if they are negative, precipitous, and lengthy.
3.) Know your spending habits. Have a very good grip on your budget process, and where you can squeeze out a little more to invest. Having good habits and keeping debt low entering retirement helps with the life of your investment also.
4.) Do not put all of your eggs in one basket, or as you more commonly hear, diversify. Start a Roth IRA to balance out your taxable 401k; Purchase an annuity or two to ensure a steady income stream that will not run out. Purchase some property that you can earn an income from during retirement; invest in bonds and low maintenance mutual funds.
5.) Plan for the inevitable medical expenses that come with age. The Law allows for a dedicated retirement account used exclusively for health care to be non-taxable, if health issues are likely, start one. Look at a life insurance policy that includes living benefit provisions, or look into long term care protection. If your company offers an HSA, enroll, and start paying into it.
6.) Save, save, save. Find high yield savings accounts, and be certain to have an emergency account. Having one allows you to be able to not have to make withdrawals from your retirement funds, or acquire more debt. Having one allows you to be able to make investments that otherwise would only be dreams.
The best way to alleviate worry is to trust; Faith in the One who provides for us, and being a good steward of what we're given allows us to sleep at night. Hopefully there are ideas here that will help you. Please feel free to contact me if you would like a more personal analysis of where you sit. A great question, and one I'm glad that you asked. Thanks!