Plan for the unexpected
During your working career, you have the opportunity to earn and save for the future. Like many people, you may plan for an uninterrupted and growing income throughout your career that will allow you to steadily build a comfortable nest egg. But unfortunately, the reality is that almost everyone experiences disruptions in their income before retirement.
A recent report from the National Endowment for Financial Education reveals that 96 percent of American men experienced four or more income shocks — defined as a loss of 10 percent or more of earnings — by the time they reached age 70.* Poor health and disability, job loss and divorce are some of the most common causes of financial blows.
Fortunately, you can help keep financial setbacks from derailing your retirement plans by planning ahead for them. Here are tips for staying on track if hurdles come your way:
Start saving early.
The earlier, the better. The more money you’ve saved, the less vulnerable you’ll be to financial setbacks. There isn’t a one-size-fits-all formula for saving. Participating in an employer-sponsored retirement plan is a popular option because it offers reliability and consistency.
Maintain emergency savings.
Having an emergency fund in a
savings account or similar vehicle can allow you to cover unexpected expenses without going into debt or tapping your retirement savings prematurely.
Live a healthy lifestyle.
Poor health is one of the greatest threats to retirement saving. Hospital bills can eat up a large chunk of your funds. You can help keep yourself in tip-top shape by eating well, exercising, getting enough sleep and scheduling regular exams with your physician.
Expect the unexpected.
Insurance can help protect your savings if you’re sidelined by a serious illness or accident — particularly health and disability insurance. Insurance may not seem necessary if you’re young and healthy, but it could save you thousands of dollars if the unexpected happens.
Plan your recovery.
If you’ve been dealt a financial blow, re-evaluate your retirement savings when the emergency has passed. Figure out what it will take to get back on track, then implement your plan.