3 signs you can't afford to retire, even if you've been saving for years

By Liz Knueven

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Retiring isn't always as simple as leaving work. For most people looking to retire, it involves years of saving, investing, and planning to go successfully. 

And even then, there's no foolproof system to make retirement possible — even if you've saved for years, it's possible that you still haven't saved enough, or made moves that compromise your retirement plans. Fortunately, with some dedicated planning and early action, some of these issues can be reversed

Here are a few signs you won't be ready for retirement, regardless of how long you've saved.

1. You've made an early withdrawal or taken a loan from your 401(k)

The CARES Act made it easier than ever to take loans and early withdrawals from a 401(k). But it didn't reduce the damage a withdrawal can cause.

Taking money out of a retirement account early can have a big impact on the amount you'll have available for retirement later because your money has less time to grow, even if it's only gone for a few months. A study by Boston College's Center for Retirement Research showed that savers who had taken a loan or early withdrawal reduced their available funds in retirement by about 25%.

It's possible to reduce the damage by putting the money back. But, 401(k) loans can cause money to miss out on growth, which might mean pushing back your retirement plans to give money more time to grow, or adding extra money to your account to make up for lost gains. 

2. You haven't updated your savings rate for your 401(k) or IRA in years

Retirement savings are typically automatic, coming directly out of your paycheck, but if you haven't thought much about your plan in years, you might not be on the right track. While it's easy to set a savings rate or monthly IRA contribution, it might be too little. 

According to investment company Vanguard, the most typical automatic enrollment savings rate is 3%. And while that's a good start, many people need to save more to retire comfortably.

Financial planners recommend saving about 15% of your salary for retirement, including any employer match in a 401(k). But, it doesn't mean that you have to start saving 15% immediately. Financial planner Natalie Taylor suggests using an automatic increase feature, which increases contributions by 1% each year. Whether you do it automatically or manually, it's worth making plans to increase your contributions with time. 

3. Your retirement money isn't actually invested — it's just sitting in cash

While it can be tempting to keep your retirement savings in cash where they're not subject to the ups and downs of the stock market, investing your funds and taking some risk is important to growing your nest egg effectively over time. 

"You'd be amazed at how many 401(k) accounts I see with 50% or more sitting in cash," Taylor writes. The amount of your portfolio that should be in cash varies greatly by age, but most retirement funds do need at least some investing.

Keeping cash sitting in your retirement accounts "is almost like putting food into the microwave, or putting food into the oven, and not actually turning it on," financial planner Kevin Matthews previously told Business Insider. However, there's still time to turn that microwave on and get your retirement account going.  Checking on your 401(k) or IRA now can help avoid surprises later.

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