First Person: My Unrealistic Target Retirement Date Had Me in a Panic

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I started getting knots in my stomach when I'd think about my target retirement date. While a lot of women look forward to saving the date for their wedding or party, I was excited to set the date for my big retirement day for the day I turned 62. I may have been a bit too optimistic, setting my retirement date at 2035. Each year I get closer to my target retirement date, I realize it's completely unrealistic. One of the key ways I was preparing to retire at age 62 was to save using target-date mutual funds in my 401(k). According to an article by Reuters, target-date funds represent the second most popular allocation. The most popular allocation is large-stock funds. In fact, target-date assets total more than $500 billion, according to Reuters. I liked the target-date funds because they shift from stocks to bonds as I get older. What I don't like is the mediocre returns. I decided to do something about it.

Treating retirement like an emergency

When I treated my debts like an emergency, I was able to get out of debt in no time at all. It may take a lot longer for me to save enough for retirement, but I had to get serious about my retirement savings. I approached my retirement savings as if it was a payment to the mortgage or utility company. I always pay my mortgage so my home doesn't go into foreclosure. I always pay my electric bill so I don't lose my air-conditioning in the Florida summers. I now pay my "retirement savings bill" as if my life depends on it.

Balancing an aggressive stance

I know I have to take a more aggressive stance now by having more exposure to the stock market while I'm in my 40s. I can reduce my exposure when I am in my 50s and 60s. At the same time, I am skeptical about bond risks. Some experts say the bond market is nearing the end of a bull run. My solution has been to take my money out of the less aggressive target-date funds. I was able to rollover the money from a 401(k) plan into a Rollover IRA. I then purchased individual stocks that pay dividends. I also diversified with gold and real estate investment trusts or REITs.

Working to my full-retirement

My full retirement age is 66. I decided to adjust my target retirement date by four years so that I would retire at 66 instead of 62. Because I'll get a larger social security benefit every month, I won't have to worry as much about getting double digit returns on my money. I also talked to my husband about making sure he doesn't shrink my retirement. According to a Next Avenue article, most men who delay receiving social security benefits provide their wives with more income in the future. Half of men claim social security at age 62. It turned out I don't have anything to worry about in my case, since my husband says he doesn't plan to retire.

After changing my retirement target date and shifting my retirement money around, I felt a lot better. Instead of getting a 3 percent return from my target-date fund, my returns jumped to 15 percent. Of course, the improved returns could be attributed to the bull stock market. But the more impressive change was the fact that I boosted my retirement savings from 3 percent to 10 percent of my earnings. Whether the stock market cooperates or not, I'll be closer to my goals when I hit my target date.

More from this contributor:

Tricks to Pay Down our Mortgage

Tapping My Retirement to Pay for College

My House is Part of my Retirement Plan

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