Retirement savings is an issue that increasingly worries Americans, since most believe or consider that they do not have enough funds saved to enjoy a good retirement with all expenses and costs covered.
Whether retirement is a decade away or even further away, well, you better start planning how you’ll grow your savings during this time.
The Growing Concern About Retirement Savings Among Americans
Banking experts have shared various strategies that can help you significantly increase your retirement fund over the next ten years, using the tools and services offered by your local bank.
Remember that a bank is not only a place to keep your money so that no one steals it, but it can also be your ally to grow your savings. Used correctly, a bank can offer you effective tools to make your money work for you.
“Developing a personalized investment strategy is critical to building wealth and maintaining it in retirement,” says Nick Campanale, private wealth financial planning manager at Citizens Wealth Management. Campanale emphasizes that compound interest is key to the growth of savings, allowing them to not only grow from the initial investment, but also from the interest accumulated over time.
Are You Risk-Tolerant? Investing Could Be a Great Option
In addition to focusing on capital growth, it is important to consider each person’s risk tolerance and how changing circumstances may affect investments. Working with the bank to regularly evaluate the investment portfolio is a strategic measure that can ensure savings align with long-term financial goals.
“Continuous monitoring allows for strategic adjustments as you continue to grow and protect your assets,” explains Campanale. This periodic reassessment is essential, as significant life events, such as marriage, the birth of a child, or approaching retirement, can influence risk tolerance and investment structure.
Ben McLaughlin, president of Raisin and a financial expert, has suggested in interviews that, as one approaches retirement age, a more conservative, less risky strategy is a good approach, to risk as little funds as possible.
Cash investments, such as certificates of deposit (CDs), can offer security and stability in a retirement portfolio. “Cash investments can be a safe part of your retirement portfolio. CDs are insured and guaranteed investments, as long as you meet federal insurance guidelines,” says McLaughlin.
Always… Always… Always Talk to a Financial Advisor!
Another strategy recommended by experts is to establish a strong relationship with a financial advisor. This professional can offer a comprehensive plan to manage assets and address financial challenges that may arise over time.
Mary Hines Droesch, director of banking and lending products at Bank of America, strongly emphasizes the importance of seeking financial advice, especially when it comes to managing the complexities that arise when growing wealth.
“Seeking the advice of a financial professional is very helpful, especially when you need to create a plan to manage the complexities and unexpected events that arise as you grow your wealth,” says Droesch.
The Safe and Reliable High-Yield Savings Account
For those looking for a less traditional but still effective approach, a high-yield savings account may be a viable solution. Although these accounts are not typically viewed as part of a retirement plan, they can play a crucial role in providing a liquid cash fund for emergencies or large purchases without penalizing other investments.
McLaughlin explains: “People may not automatically think of high-yield savings accounts as part of their overall retirement savings plan, but they can serve an important role.”
Two Changes Coming to Social Security in 2025
Many people who rely on their retirement savings often also rely on their Social Security payments to make ends meet and have a comfortable life. Among the many aspects to consider is the issue of COLA increases, which is a tool that Social Security benefits use to deal with inflation.
The cost of living adjustment (COLA) for Social Security beneficiaries in 2025 is expected to be significantly lower compared to previous years. The COLA is closely tied to inflation, and with notably lower inflation rates projected this year, seniors could face a lower benefit increase than in recent times.
To put it in context, in 2023, the COLA was 8.7%, in 2022 it reached 5.9%, and in 2024 it stood at 3.2%. However, experts now estimate that the adjustment by 2025 could be as little as 2.7%.
This potential minor adjustment is cause for concern, especially when considering that the COLA calculation has historically underestimated the actual inflation faced by retirees. The price index used to determine these adjustments is based on the spending patterns of urban white-collar and salaried employees, which does not accurately reflect the specific needs and expenses of retirees. As a result, COLA increases often fail to fully offset increases in the cost of living experienced by retirees, resulting in a progressive loss of purchasing power over time.
Delay in the Full Retirement Age (FRA): What to Expect
In parallel, another significant change that must be monitored is the delay in the full retirement age (FRA), a crucial factor for those who are close to retiring. Starting in 2025, the FRA will begin to increase.
Those who turn 66 in 2024 will have an FRA of 66 years and eight months, but those who reach that age in 2025 will have to wait until age 66 years and ten months to be eligible for full retirement. This threshold will continue to rise, so that those who turn 66 in 2026 or later will have an FRA of 67 years.
This change to the FRA is essential when planning for retirement, as claiming benefits before reaching full age can result in permanent penalties. These penalties imply a monthly reduction in benefits that can be significant throughout the beneficiary’s life. For example, filing for benefits even one month before FRA can reduce monthly payments by 5/9 of 1% for each of the first 36 months, and by 5/12 of 1% for each additional month.