Five Steps for Increasing Retirement Income
Fidelity Investments modeled five steps that investors of all ages can use to increase their retirement income. The steps have varying impacts individually, but when combined, they have the potential to significantly increase retirement income.
The steps are:
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1. Adjust Asset Allocation—A Fidelity survey of 2,800 investors found that most followed a portfolio allocation strategy that was more conservative than their age would dictate is appropriate. Investors born after 1964 (Generation X and Generation Y) stand to reap the biggest benefits from a more aggressive allocation because of their long investing time horizons.
2. Save More—Increasing contributions to a 401(k) retirement plan from 5% of annual income to 10% over the course of four years can increase monthly retirement income by more than $400 for someone currently age 55 (assuming an additional 3% employer match). Saving more to a traditional IRA or a Roth IRA account can boost retirement income even further.
3. Delay Retirement—Postponing retirement by just two years can boost monthly income by more than $500 thanks to larger Social Security benefits and a longer investing time horizon. Even working part-time can help overall retirement income. Delaying retirement has a bigger positive impact on retirement income for Baby Boomers than any other step.
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