7 Ways to Stay on Track and Meet Your Retirement Goals
Are you on track to retire comfortably? What are your financial goals? How much income will you need to generate each month when you have retired? What might be some of your longer-term goals outside the financial arena, but goals that would be aided by a larger pool of savings?
Our regular check-ins with clients are designed to measure progress toward their goals, making adjustments as life’s journey unfolds. Saving for retirement is a long game; It’s a marathon. You could compare it to the fable The Tortoise and the Hare. A sprint won’t get you to your destination. Slow and steady progress will.
Unfortunately, 75% of Americans receive no professional assistance for this long haul. In my view, that’s simply unacceptable. It leaves far too many folks exposed to the many financial pitfalls that are lurking. As Ben Franklin said, “If you fail to plan, you are planning to fail!”
Following are seven ideas and concepts we encourage on a regular basis so that you can stay on track.
1. Set goals
Too many people simply guess what they will need in retirement, and many don’t have a written plan to reach what goals they have set. Others simply don’t have any goals. If you don’t have goals, you’ll drift, financially speaking.
2. A comprehensive and holistic financial plan is a must
While regular savings is important, a roadmap that takes you to your goals is critical.
Did you know that if you start saving $600 per month at age 30, you will have $1 million when you turn 65, assuming an average return of 7% per year.
If you start saving at 20, $300 per month will allow you to hit the same goal.
I’m not saying that $1 million is the magic number, but the example highlights that consistency, starting early, and the magic of compounding can help you reap big rewards.
I assist clients by advocating a diversified portfolio that generally includes stocks, bonds, fixed income and more. While much work goes into the individually crafted plans I recommend, much of what I counsel is based on the evidence that long-term exposure to stocks has outperformed simple savings accounts.
I help to bridge the divide between a simple savings account and a diversified portfolio.
3. Never stop saving
After paying for housing, food, and other expenses, are you able to consistently save money? A survey by Bankrate suggests that one in five Americans aren’t saving anything, and only one in six save over 15% of their income.
Why aren’t we saving? According to the survey, 38% of working Americans have too many expenses. For example, on average Americans shell out more than $2,900 a year on restaurants, prepared drinks, and lottery tickets.
I’m not saying that a spartan existence that eliminates frills, fun, and entertainment is the path to take. Instead, examine your expenditures closely. You might quickly find ways to cut back while still enjoying life’s pleasures. And consider paying yourself first when you receive your check by setting up an automatic payment into savings.
4. Retirement savings is a key component
If you want to stay on track for retirement, the importance of regular contributions to a retirement fund is critical.
Employee 401(k) contributions for 2021 top out at $19,500, with an additional $6,500 catch-up contribution allowed for those that are 50 years or older. At a minimum, don’t leave any free money with your employer. Be sure to contribute what you need to receive your employer’s full match.
For 2021, you may contribute up to $6,000 to an IRA or Roth IRA ($7,000 if you are 50 or older). Just be aware that the IRS imposes various limits based on your income. I’d be happy to share additional details, or you may check with your tax advisor.
5. Did you get a new job?
Congratulations. As you look at benefits, how quickly can you start contributing to your company’s retirement plan?
Plus, don’t forget about your prior 401(k) plan. Roll it into an IRA or into your new 401(k). Unless there is an extraordinary circumstance (and we’re not talking about a new TV or a vacation), don’t fritter away your retirement assets. Withdrawals from these tax-deferred plans will probably be subject to taxes and penalties.
6. Get out of debt today
Some debt can be productive. For example, a mortgage allows you to purchase a home and build equity instead of renting. But in many cases, debt can be counterproductive.
Your student loans helped you pay for your education. Although the situation with student loan debt is fluid, this is debt that’s best paid off. Credit card debt also falls under the unproductive category. Besides, many come with high-interest rates.
As with credit cards, student loans, and other unproductive liabilities, I can offer you guidance that helps reduce and eliminate burdensome liabilities.
7. Check in with Social Security
The Social Security website, www.ssa.gov has a considerable arsenal of resources. It’s a good idea to check-in online and make sure there has been an accurate accounting of your annual income. If your income is understated, your benefits will be shortchanged.
My goal is to help clients replace a substantial portion of their income when they leave the workforce. How much will depend on their goals and what they may want to do in retirement.
I firmly believe that these ideas are a great place to start, putting you and keeping you on track for your retirement.
Please don't hesitate to reach out with any questions.
To your retirement success,