Retirement expert Ric Edelman, the founder of The Digital Assets Council of Financial Professionals, recently joined TheStreet to provide advice for individuals looking to catch up on their retirement savings. He addressed common regrets and offered strategies for those nearing retirement.
Common Regret Among Retirees
Edelman identified the biggest financial regret among retirees as not having started saving earlier in life. He emphasized that many retirees wish they had begun saving in their 20s, and this lack of early savings is a shared regret.
Advice for Those Nearing Retirement
Edelman acknowledged that it is challenging for those who feel unprepared for retirement to rectify their financial situations entirely. He advised that individuals in this situation need to take several key actions:
- Extend Working Years: Individuals may need to work longer than initially planned to increase their savings.
- Increase Savings Rate: It is crucial to allocate more money to savings, even if it feels financially burdensome.
- Reduce Expenses: Although not a favored option, reducing expenses could be a necessary step. This might include drastic measures such as downsizing major commitments like housing.
- Invest for Higher Returns: Investing in financial markets rather than low-yield accounts is essential to achieve the necessary returns to accumulate sufficient retirement funds.
Impact of Inflation on Retirement Preparedness
Edelman highlighted the ongoing challenge posed by inflation. Recognizing that high prices from recent years will persist, he emphasized that retirement funds need to earn returns that outpace inflation. Comparing various asset classes, including stocks, bonds, real estate, gold, oil, cryptocurrency, as well as bank accounts and money market funds, he advised choosing investments that have the potential to exceed the inflation rate, especially when factoring in the impact of taxes. He noted that overcoming the dual challenges of inflation and taxation is complex but necessary for achieving a real rate of return on investments.
Conclusion
Edelman’s insights underscore the need for proactive and strategic financial planning for retirement. His advice points toward extending work life, increasing savings, cutting expenses, and making smart investment choices to maximize retirement readiness in the context of enduring inflation and rising taxes.