Because of the reduced role that Social Security may play in your retirement income, it’s important to boost your saving and investing strategies. Getting an early start can make a big difference, notes Merrill Financial Advisor Robin Dziuba. For example, thanks to the power of compound interest, someone who started saving $500 a month at age 25 would have $588,000 at age 55, assuming a 7% long-term return, while someone who began saving the same amount 10 years later would only have about half as much, or $256,000.2
It could also help to reconsider your asset allocation. Though fixed income has a place in providing retirement income, investing a greater portion of your savings in equities and dividend-paying stocks might help to increase your nest egg’s growth potential, Dziuba suggests. You might also consider adding exposure to real estate — either by investing in REITs or owning an income-producing property.
Another investment option to consider is investing a portion of your savings in an annuity, says Tantillo. These insurance contracts offer tax-deferred growth on your assets and can create a consistent stream of income for life or for a period of time specified in the contract. “An annuity can provide an additional guaranteed income stream to supplement what you get from Social Security, and it could make it easier for you to manage ongoing day-to-day expenses in retirement,” he adds. Your advisor can help you understand the various types of annuities and what they can offer, as well as their risks, and help you establish an appropriate investment allocation for your goals, age, liquidity needs and risk tolerance.