Just about everyone thinks about retiring, from what we’ll spend our time doing, to where we’ll live, and more. However, only some of us adequately prepare and save for retirement.
Saving for retirement doesn’t happen overnight, and it can’t be achieved in just a few years beforehand. It typically takes years of focusing on your retirement objectives and capturing savings in support of those goals. If the following characteristics sound like you, congratulations! You’ve successfully embraced the immediate and long-term benefits of saving and are effectively focused on your long-term financial needs.
1. You Don’t Rely On Credit Cards Or Home Equity Loans
One of the best indicators that you’re on track financially is that you’re not reliant upon debt. You pay off your credit card balances in full each month, and don’t rely on lines of credit such as home equity loans to finance unexpected or large expenses like home repairs or college funding.
2. You’re Actively Saving Outside Of Your Company Retirement Plan
If you’re maxing out your company retirement plan and also capturing additional savings, you’re on a smart financial track towards retirement. You’re not only saving more, you’re also funding different retirement buckets, gaining a mix of pre-tax and after-tax dollars. This can dramatically help to save on taxes in retirement.
3. You’re Saving Enough, Relative To Your Earnings
It’s simple: the more you make, the more you need to save. You’re making good progress towards retirement if you’re saving at least 10% to 20% of your earnings (depending upon your age and any potential entitlement to a pension).
4. You’re Not Relying Upon An Inheritance
Unless you come from a very wealthy family, banking on an inheritance is a risky proposition. Proactive financial planning is the best way to assure your retirement goals, with any potential inheritance merely providing a means of accelerating your life and wealth objectives.
5. You’ve Developed A Retirement Plan
Long-term planning projections help quantify if you’re on target to retire, or what changes are necessary to assure your success. Frequent updates are always recommended to account for life’s inevitable twists and turns.
6. You Work With A Financial Advisor
If your financial plan is a road map to retirement success, your financial advisor is your tour guide. It’s strongly recommended that you work with an independent advisor who can:
- Properly account for taxes versus simply using an effective tax rate.
- Include Monte Carlo, or stress test simulations, to evaluate varying market outcomes.
- Help you monitor spending as a key variable in planning projections.
- Mindfully account for real life expenses, like car purchases, health care expenses, the effects of inflation, and more.
7. You Know How Much Social Security And Pension Benefits Will Supplement Your Retirement Income
For some fortunate individuals, Social Security and pension benefits will account for the bulk of their income in retirement. However, pensions are increasingly uncommon, and Social Security benefits alone never entirely replace your paycheck. Understanding your potential future benefits, relative to your living costs, enables you to pinpoint any potential income gaps that’ll need to be supplemented from savings.
8. You Follow A Value System In Balancing Spending And Saving
Being a successful saver involves recognizing the need to balance life enjoyment today with financial security for tomorrow. If you commonly consider the following, you’re thinking the right way about your future:
- Evaluating needs versus wants, and striking a healthy balance between the two.
- Prioritizing spending objectives e.g., buying luxury items versus saving for college.
- Recognizing that people and experiences enrich your life more than possessions.
- Understanding the importance of building financial security for yourself and your family.
9. You’re Proud Of Your Savings And You Feel Financially Secure
Watching your savings grow should inspire a sense of satisfaction and achievement, helping you to feel more optimistic and confident about your future. Ultimately, the purpose of saving for retirement is to enjoy financial freedom without being beholden to a job or paycheck. Hopefully, as your savings grow, so too does your sense of empowerment about the future you’re securing for yourself and your loved ones.
SageVest Wealth Management’s CFP®-certified advisors appreciate life’s ongoing balance between enjoying today and saving for tomorrow. We help you make wise and thoughtful financial decisions that are mindful of your priorities, working with you to set goals, monitor achievements, and redirect in response to life events. Please contact us if you’d like to evaluate your current retirement savings plan and how we can help you better prepare for the future you envision.