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Rarely anything happens without a plan. Even your daily to-do list is essentially a plan. If something isn’t on that list, the chances of it getting done go down dramatically.
So your financial security certainly isn’t going to happen without your attention.
But I’m Going To Start Saving For Retirement When…
Boosting your savings rate probably won’t happen because it made your list of New Year’s resolutions. Nor will it be at the top of your “to-do” list when you land a big raise.
The chance of increasing your retirement contributions becoming a priority when the kids are out of daycare or college isn’t as high as you’d like to believe.
Maybe the money you thought you’d save at key times in your life went toward debt payments or inflating your lifestyle.
While those aren’t necessarily bad things, there’s a really good chance saving more for retirement won’t happen unless you make a plan to make it happen.
Financial planners know plenty of people in their 60s who have just gotten started on their financial plans.
They've saved a bit along the way because they knew they were supposed to. But they never followed a long-term strategy.
As a result, they have not saved enough to support the retirement lifestyle they want to enjoy after leaving work. And in the majority of cases, they're already mentally ready to leave their jobs.
Not Saving Enough
Compiled by Vanguard and reported in How America Saves 2021 are the average and median balances at the end of 2020 from data on 4.7 million defined contribution plan participants, listed by age group and gender.
|Age||Average Account Balance||Median Account Balance|
Fortunately, because they saved some money and have equity in their homes, they're usually able to support themselves.
Still, their lack of financial planning earlier in their working years means they'll have to make significant changes to their lifestyle – even if they plan to work until their seventies.
They’ve missed the magic of compound interest growing into a large retirement nest egg over decades.
Now, of course, if you're not currently saving (or saving enough), stashing away more may require a change in your lifestyle – even if it’s only being more conscientious with how you spend.
It’s never too late, but the sooner you start, the less dramatic and painful those changes will be.
The Next Best Time is Now
While you recognize that the best time to start investing for your future was yesterday, the next best time is today.
To make sure that you indeed stick to your plan once you start, you need to begin by defining your goals.
1. Name your goals.
Some goals are far away and as hard to imagine as they are easy to put off. Typical savings metrics are uninspiring.
- You need at least three to six months (or more) of expenses in an emergency fund.
- You need at least 25 times your income in savings before you can retire.
Both of these are daunting and unimaginable to many people because they aren’t financially healthy.
But reframing what savings goals are for can help people move forward and make changes.
Savings isn’t actually about the money, but rather what you want to do with the money.
So rather than save an emergency fund, a better-stated goal would be to prevent yourself from a financial setback if something bad happened, such as a job loss.
Call it a “protect yourself fund,” if that is more inspiring!
Rather than saving for retirement, save for the freedom to choose whether to keep working and who to work for.
Retired people who work even if they can afford not to will tell you that “work” is very different when it’s your choice and not out of necessity.
2. Set a target.
The next piece of a good plan is to define your goal – and this is where the money comes in. Your goal isn’t about the money, but it does have a price tag.
If you find saving hard, simply start with a dollar figure you can live with. However, ultimately you will want specific targets, especially for your long-term goals.
And you’ll want to break those goals down into shorter, more manageable targets, like how much you want to save this year, in the next three years, and so on.
The rules of thumb can be a good place to start, but you know your circumstances, so make your own targets.
3. Strategize achievement.
With your goal defined, you can develop your strategy. Be very specific. Decide exactly what you will change daily, weekly, and monthly to achieve your goal.
Think about what might go wrong and how you will adapt, and if you can’t do all you want to do now, think about how you can do more later.
If you have a significant other, you have to work together on this. It will be hard to make progress if you both aren’t all in on changing your financial future.
Decide together on your goals and your strategy, and hold each other accountable.
Financial Planning for Retirement
It’s time to Save Yourself so that you can afford to retire and enjoy your “golden” years.
If you aren’t sure where to start, consider reading the book Save Yourself by Julie Grandstaff. It provides a step-by-step guide to creating your financial plan – from developing goals and defining them to creating a strategy to achieve them.
In the final chapter, Julie walks you through the development of a real couple’s financial plan. There are also worksheets for you to use and references to various calculators throughout the book to help you create a financial plan that'll work for you.
Here are a few other recommended tools:
- CalcXML Retirement Planning Calculator
- Empower’s Retirement Planner – Free to Use
- Tiller's Retirement Planning Spreadsheet – Free to Use with a 30-day Free Trial of Tiller
Take some time during Financial Planning Month to start down the path to financial independence. And a big part of your financial plan is estate planning. The third week of October is designated as National Estate Planning Awareness Week
Remember, nothing happens without a plan, and that goes for your financial security too.
Julie is the author of “Save Yourself: Your Guide to Saving for Retirement and Building Financial Security.” She’s a twenty-five-year veteran of the financial services industry, where she managed billions of dollars for both individuals and institutions. Julie retired at the age of fifty-one. Her book, “Save Yourself,” is a comprehensive guide to saving for retirement and shoring up your financial security so you can do whatever it is you want.