Each of us has fallen into the “I’ll do it later” trap. Before you know it, time has passed and you find yourself still doing nothing. Only now you’re looking back wondering what things would be like if only you had taken the time to do something.
I recommend, in the strongest terms possible, not taking the do-nothing or “I’ll do it later” approach when it comes to retirement planning. According to the Center for Retirement Research at Boston College, 50% of working families are currently not saving enough to maintain their current standard of living once in retirement. How can you know what you should be saving now? It’s actually a relatively simple concept. Create a financial plan. Here are a few tips to get started.
Establish a client-adviser relationship. We believe it’s important to have a professional on your side who understands your needs, goals, and the services/tools needed to achieve your goals. Any solid relationship is based on trust. It’s important to know an adviser is working in your best interest. Be aware of how the adviser is compensated: fee-only or commission? If you’re not sure, ask first because it might affect your decision on who to work with.
Be prepared to stipulate your goals and expectations. It is the adviser’s role to collect as much information about you as possible. Assets, liabilities, income and expenses, employment compensation, current retirement savings, and risk tolerance are just a few categories we feel should be touched on.
Analyze the data. The adviser will analyze the information provided and determine what you should now be saving for retirement.
Build the plan. The data collected and analyzed from the previous step should be used by the adviser to develop a workable plan based on your needs. The plan should then be presented to you, in writing, in a manner that makes sense to you.
Act on the plan. Begin investing in a retirement account (or adjust your current contribution level to align with your new plan). Retirement savings plans come in many flavors. Roth IRAs and 401(k) plans are popular options. Decide with your adviser which option is best for you.
Monitor performance. We believe a good adviser should monitor the performance of your investments, recommend changes, if necessary, and meet with you no less than annually to discuss your portfolio and make recommendations as necessary.
A clearly-defined financial plan that has been established and implemented can provide peace of mind. Having unclear retirement savings goals puts you at risk for not having enough saved for retirement to maintain your current lifestyle. This risk can be avoided, but you first must have a plan.
Remember, it’s better for your money to outlive you rather than for you to outlive your money.