Ask Your Employer For Help
When it comes to preparing for retirement, your job may have much more to offer than a 401. As you focus on building your savings and improving your overall financial well-being, it can help to ask what types of assistance are available at work.
“The reality is that many individuals don’t recognize how many great resources are available to them — and many without cost — directly from their employer,” Armstrong said. More workplaces now offer financial wellness solutions to support their employees, including HSAs to offset the burden of medical costs, student loan repayment support and tools for building emergency savings.
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Have A Positive Outlook
Dont worry. Be Happy.
Not only the catchy lyrics to a happy song
but also a proven way to have a better retirement.
Its a proven fact that Attitude Affects Outcome. You can choose to have a positive attitude toward retirement, but many people dont. From the research: only half of those who were planning to retire in the next five years were looking forward to it, with 41% worried about managing their money a third concerned about feeling bored and missing their social connections from work , and nearly a quarter worried about losing their purpose .
Choose to be among the 50% who look forward to retirement. A positive attitude can positively impact your retirement just as surely as a negative attitude can negatively affect it. From the research: Negative expectations about the consequences of retirement predict difficulties in adjusting both for the person retiring and for their partner.
These findings suggest that negative expectations about retirement could become a self-fulfilling prophecy and that consideration of the retirement experience must take into account the partner of the retiring individual.
Were all free to choose the attitude with which we live our lives. Its a choice. Make the right one. Choose To Be Happy, and choose to be excited about retirement.
What I Didnt Love About The Book
I get that Fritz felt there was already a glut of retirement planning materials on the market focusing on money. He tried to write a different book that focused on the non-financial aspects of retirement. But is it really possible to effectively discuss retirement planning without getting into financial details?
Fritz wrote on page five, The most important step in the process is determining what type of life you want to live in your retirement years. As youll see, this drives the financial aspects of retirement and has a direct impact on when youll be able to retire.
I agree that you should start with what you want your retirement lifestyle to look like. Then reverse engineer your finances rather than starting with money and allowing finances to dictate your lifestyle. But regardless of where you start, these two components of planning are impossible to separate.
He also wrote As your retirement evolves, money becomes something you think about less and less. This may be true IF you planned well. But Im willing to bet that a lot of people who didnt plan well are having sleepless nights right now because theyre thinking a whole lot about money.
The bottom line is, you cant have a realistic conversation about planning your retirement without having a detailed understanding of your finances. Fritz reluctantly acknowledges this in Chapter 2: What to Do When the Paycheck Stops. But he covered complex and vitally important financial issues superficially.
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Having A Positive Attitude Towards Towards Your Future
Your ability to roll with the punches will dictate how you approach most areas of your future life. There are life changes that you can expect in retirement , both positive and challenging. In fact, sociologists have identified at least six separate life transitions that will affect most people as they move through their retirement life . Perhaps the greatest transition of all is the one that you see each time you look in a mirror and see yourself change . It is easy to forget that getting older is a physical issue, not a mental one. . As Satchel Page once asked, How old would you beif you didnt know how old you are?
How Much Do You Need To Save For Retirement
Before anyone starts crunching the numbers on their retirement goals, they will need a good idea of how much money they need to save. Naturally, this will depend on many situational factors, such as their annual income and the age when they plan to retire.
While there is no fixed rule about how much money to save, many retirement experts offer rules of thumb such as saving about $1 million, or 12 years of one’s pre-retirement annual income. Others recommend the 4% rule, which suggests that retirees should spend no more than 4% of their retirement savings each year in order to ensure a comfortable retirement.
Since everyone’s circumstances are different, it is worth sitting down to calculate the ideal retirement savings for your own situation.
Order your copy of the print edition of Investopedia’s Retirement Guide for more assistance in building the best plan for your retirement.
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Nurturing Family And Personal Relationships
Our close personal relationships define us, give us a purpose for living our lives and encourage us to create life goals. We all have a basic need to share our lives, experiences and life journey with those closest to us In retirement our friendships and close relationships may offer us the validation that we may have received in the workplace. Those relationships give us the opportunity to connect on many levels with someone close and to share ourselves. Psychologists have identified our desire to share ourselves as a basic human need. This need is often satisfied in the activities that we enjoy with our spouse or partner, friends and family.
Researchers have found that people in satisfying personal relationships have fewer illnesses and higher levels of good overall health. Thats the clinical rationale. In real life terms, having people close to you who will share your life and be there for you will not only add to your overall life enjoyment, but will also add years on to your life!
Take Advantage Of Your Employers Match
Do you know what boggles my mind? Almost 20% of Americans arenât contributing enough to their employee-sponsored 401 plans to earn the company match. Thatâs the definition of missing out on âfreeâ money.â
âThatâs your company literally saying: âHey, hereâs some free money, do you want to take it?ââ financial expert Ramit Sethi tells CNBC Make It. âIf you donât take that, youâre making a huge mistake.â
âWhile itâs fair to think about your employer match as âfree money,â itâs better to view it as part of your total compensation package,â explains money reporter Anna Hecht. âIf you contribute enough to earn the full match, youâll get all of the money your employer owes you. That can be a significant amount: The average employer 401 match reached 4.7% this year, according to retirement plan provider Fidelity.â
âA buy-one-get-one-free deal is how I think of it,â adds Monica Sipes, a certified financial planner and senior wealth advisor at Exencial Wealth Advisors âThe match is something thatâs considered in your overall compensation, so by not taking advantage of it youâre not getting a full freight of what your employer was expecting to pay you.â
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How To Ensure A Successful Retirement
Most retirement plans dive deeply into details on the financial factors, but hardly any effort is devoted to the factor that contributes the most to a successful retirement. Since the pandemic began, however, people are spending more time than usual considering the really important retirement questions.
As the pandemic forced lifestyle changes on people and made their vulnerability and mortality more apparent, surveys and reports indicated people were spending more time contemplating their purposes, priorities, and how they want to spend their time.
Those are the most important parts of a retirement plan. A good way to develop them is to consider issues similar to the three questions that financial thought leader George Kinder presents in the book Life Planning for You to encourage people to contemplate at the outset of the retirement planning process.
The questions are: What would you do if you had all the money you could need? What legacy do you want? How would you live if you knew you would die in 10 years?
Considering such issues makes clear that the financial part of your retirement planning isnt the most important part. Retirement financial planning is done so that we can spend more of our time in retirement doing the things that are important to us.
The main goal of retirement planning is to free you to spend time in ways you find fulfilling and that enhance your legacy.
Other Factors That Contribute To A Secure Retirement Plan
In addition to spending less, saving more and being open to working longer or working during retirement, there are other characteristics that can help retirees create a secure retirement.
In its survey, T. Rowe Price found:
- Almost half of retirees indicated they have a withdrawal plan, and the median retirement withdrawal among them was 4% of their investable assets within the past year.
- Retirees report living on just 66% of their pre-retirement income on average, which is less than the 70%-80% that some financial planners and investment firms suggest people take into account when planning for retirement.
Although everyones needs and wants are different, all of these characteristics can help point pre-retirees and retirees in the right direction.
Theyre all related. Certainly save more and spend less thats kind of the key to the whole thing, King says. Have a goal and know how much money youll need to accumulate before you retire to have the lifestyle you want.
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Assess Risk Tolerance Vs Investment Goals
Whether its you or a professional money manager who is in charge of the investment decisions, a proper portfolio allocation that balances the concerns of risk aversion and returns objectives is arguably the most important step in retirement planning. How much risk are you willing to take to meet your objectives? Should some income be set aside in risk-free Treasury bonds for required expenditures?
You need to make sure that you are comfortable with the risks being taken in your portfolio and know what is necessary and what is a luxury. Dont be a micromanager who reacts to daily market noise, advises Craig L. Israelsen, Ph.D., designer of 7Twelve Portfolio in Springville, Utah.
‘Helicopter investors tend to overmanage their portfolios,” Israelsen adds. “When the various mutual funds in your portfolio have a bad year, add more money to them. The mutual fund you are unhappy with this year may be next years best performerso dont bail out on it.
Markets will go through long cycles of up and down and, if you are investing money you wont need to touch for 40 years, you can afford to see your portfolio value rise and fall with those cycles, says John R. Frye, CFA, senior advisor at Carnegie Investment Counsel. When the market declines, buydont sell. Refuse to give in to panic. If shirts went on sale, 20% off, youd want to buy, right? Why not stocks if they went on sale 20% off?
Be Flexible With Your Spending
Most retirees exhibit flexible spending habits, according to the T. Rowe Price study. Three in 5 would rather adjust their spending up and down depending on the market to maintain the value of their savings and investments rather than maintain the same level of spending year after year, risking potentially diminishing their portfolio.
Willingness to be flexible with spending is absolutely key both before and during retirement, says Jon R. King, certified financial planner with Austin, Texas-based Pegasus Financial Solutions, LLC.
Spending before retirement is important because the less you spend, the more you save, he says. Cutting spending after retirement makes last longer.
To test just how much of an impact spending has on retirement income, King often runs a what-if scenario. In one case, he increased a couples spending by $10,000 per year and ran some projections. The two clients were in their early 50s, so the additional spending started then. With this increase, King found that the couple would run out of money at age 93, as opposed to having a $2 million surplus at age 97.
They were saving a high percentage of salary, but the $10,000 additional spending reduced the savings rate substantially, he says.
Although every case is different, and this may not be a typical result, it does show the impact spending habits can have on retirement savings.
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Finding Passion And Purpose
In the final chapter, Fritz discusses strategies to address these and other challenges. He writes, finding a passion or purpose is the most important thing you can do for a successful retirement. He then provides ideas for how to do that.
Some particularly powerful ideas were shifting your focus from success to significance and avoiding deathbed regrets. Also discussed was the fact that 25% of people unretire and return to work. The majority of them do it for non-financial reasons. I particularly liked the idea of a Victory Lap Retirement where you consider working in retirement like a victory lap, run more slowly and for a different purpose than the race itself.
An Active Social Network
As you get older, your social support network becomes increasingly important. You draw your social support network from a much broader social network. Successful retirees generally have robust social networks that provide them with friendship, fulfilling activities and life structure. As part of your retirement plan, you might want to think about the quality of the social network that you have today and your plans to build it. One of the lessons that we can learn about the aging process is that our social networks begin to shrinkif we arent continually adding to them. You can join clubs, meet new people and get out of the house to do new things. In retirement you are going to want a lot of people who you can count on and it makes good sense to continue to seek out new opportunities to socialize.
Tips For A Successful Retirement
Are you approaching retirement, or are you newly retired? In either case, you may be wondering how you can make the most of this next phase in your life. There are fresh opportunities, new challenges, and vital decisions to make before and during retirement, perhaps even new skills to learn.
The key elements to a successful retirement are both practical and emotional, ranging from an adequate income to your relationships with family and friends. You may want to think carefully about some of these elements:
- Good physical and mental health
- An adequate income
- Activities and interests
Good physical and mental health
Not of all us are lucky enough to enjoy good health as we get older, but there are plenty of things we can do to keep ourselves in good shape and to help cope with ageing, illness or disability. These include eating a healthy diet, such as the Mediterranean diet, and taking up some form of exercise: something you enjoy such as walking, swimming, cycling or dancing. Social activities, such as joining a club, volunteering, or being an active part of the community, can also help to boost your mental wellbeing, especially if you live alone.
An adequate income
As pension pots are affected by fluctuations in the stock market in response to world events, maintaining an adequate income during retirement has become a significant challenge for many retirees.
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Protecting Your Life’s Savings
One of the biggest fears retirees have is this: Will my money run out? Will we have enough to last? The first step to ensuring you have enough is to make a solid plan. Thankfully, retirees now have options to protect their money yet still have a reasonable rate of return over time. In other words you can have both protection and earnings. One of the main keys to a successful retirement is to protect your assets from loss. In fact, this is one of the topics we cover in our ongoing in-person and online retirement education seminars. We want you to have the knowledge you need to feel comfortable about your money. Additionally, we also offer one-on-one meetings with people looking to get their retirement questions answered or get a second opinion about their current situation.