Research shows that nearly 80% of Americans aren't prepared financially to retire, and many workers need more than ten times their final pay to meet retirement needs adequately.
Workers who contribute to defined contribution plans often face projected shortfalls that can be about double their final pay by retirement age, so it is important to review long-term savings plans regularly; for practical guidance see Planning for Retirement: Tips and Insights.
Because markets can change quickly, employees should avoid reacting to short-term volatility in ways that undermine long-term goals. Investment and savings strategies are the most important parts of a successful retirement plan, and staying focused on those goals helps reduce the risk of harmful decisions during downturns.
When the market is volatile, saving can be more difficult. Median return rates fluctuate and can be negative for extended periods, which may feel discouraging to savers.
Many defined contribution accounts have experienced investment losses in the past, but market setbacks do not necessarily derail long-term savings if employees continue contributing and remain invested according to their plan and time horizon.
Employees who are nearer retirement should pay closer attention to changes in their account value and consider adjustments to preserve their retirement goals.
Responding to market changes
- Save more money. Many employees don't contribute enough to receive the full employer match. Increasing an annual contribution rate by a few percentage points can produce a meaningful improvement over time, and it may help to talk to an agent to determine appropriate adjustments.
- Retire later. Delaying retirement even two years can substantially reduce a savings gap for some workers; others with larger shortfalls may need to delay retirement longer to close the gap.
- Find expert help. More employers now offer investment advisory services; using those services can help identify problems early and keep a retirement plan on track.
Employees need to take action to secure their future and, when possible, start saving at a young age to take advantage of compounding. Late starters or those who have saved at low rates can still pursue a secure retirement, but it requires planning and commitment to higher contributions.
Planning should also consider increased life expectancy and the risk of outliving savings. For additional resources on long-term care and retirement, see The Importance of Retirement Planning and Long-Term Care.
If you want help reviewing your plan or exploring options, consider talking with an insurance professional or financial advisor who can review your individual situation and options.
Frequently Asked Questions
How much should I aim to save for retirement?
Target savings vary by income, lifestyle, and retirement age, but many experts suggest aiming for a multiple of final pay and maximizing employer matching contributions when possible.
Should I stop contributing during a market downturn?
Generally no; stopping contributions can severely hamper long-term savings because you miss contributions and potential employer matches, and you lose the benefit of buying at lower prices.
When should I seek professional advice for my retirement plan?
Consider getting help if you are unsure about your investment allocation, face a significant shortfall, are approaching retirement, or want help adjusting contributions and withdrawal strategies.