So, how much is enough?
The amount of money you should have saved before you retire depends on many personal factors and considerations, including:
- Your lifestyle – if you live well within your means and have prudently saved for retirement, you may not need to adjust your lifestyle much. It is better to have the choice to downsize your lifestyle and spending habits than it is to be forced to due to lack of adequate planning.
- Your retirement plans – although it is wise to save for retirement, there are other considerations that may impact your total saving target. At what age do you plan to retire? Do you have a spouse or partner that will retire at the same time? Will you receive a pension from your employer? Do you plan to continue working part time?
- Your health – if you are healthy and have longevity on your side, consider saving more money.
- Other income source – if you will receive a pension or Social Security Insurance, include them in your overall retirement plan.
- Financial Obligations and expenses – these may include a mortgage, car payments, credit card debt, health care expenses and financial support for children or grandchildren.
Keep in mind that nothing is set in stones and your circumstances may change at anytime. Changes in your health that of a family member, or changes in your family status, may affect your financial situation. For any circumstance changes that may impact you, be sure to connect with your financial advisor who can help you reach your retirement goals.
If you do not have a financial advisor, we would be happy to refer you. Let us know!
Retirement catch-up – Get your savings back on track
- Pay yourself first – the key to building wealth is keeping a portion of what you earn. Many people participate in a 401(k) or other retirement plan offered by their employer. The employer may incentivize participation by matching a portion of the percentage the employee contributes into the account each pay check. Contributions are taken from pretax earnings, thus reducing your taxable income.
- Reduce monthly expenses – if you have not created a budget, now is the time to start. List all of your income and expenses to determine where you can be more diligent with your target saving goals. Once you have an overview of your finances, look for a way to reduce spending, starting with non-essential spendings. Create a budget, follow it, track your expenses and hold yourself accountable. Another way to reduce your overall monthly expense before you retire is to pay off any existing debt, such as mortgage, car loan, etc. Retiring debt-free will liberate your income for savings or living expenses.
- Downsize before retiring – many retirees choose to downsize after they’ve retired to reduce their living expenses. However, doing so before retirement may increase your cashflow in the short-term, while allowing you to become accustomed to your new place. If moving isn’t possible before retirement, look for ways to reduce your monthly housing costs instead.
If you are self-employed or you wish to save additional money for retirement, contact your financial professional for other retirement options.
If you don’t have one, give us a call and we will be happy to help you!
Source: Buffini & Company 2018. https://www.buffiniandcompany.com