In the past, people used to work until they died. That was when the average lifespan was about 55. Then, people worked for the same company until they retired, then collected a pension and social security, then died around the average age of 72. Now, many recommendations say to plan for a life expectancy to age 100. That’s a really long time! How do we save enough money to help fund the period in our life where we end our working career and move into this new phase? Just thinking about it is stressful.
Whether you’re new to the workforce or entering your pre-retirement phase, there are a few things that you can do today to de-stress and get your retirement plan on track. Here are a few tips to help overcome your retirement worries.
Don’t worry about every financial peak and valley
If you have paid any attention to the stock market so far this year, your blood pressure may be up. The DJIA lost 5.5% for the month; the NASDAQ lost a whopping 8%. But markets have rebounded in February. It’s been a wild roller coaster.
Stock market values change every second — literally. Stressing over every dip in the value of your retirement accounts will not increase your odds of reaching a comfortable retirement one bit. In fact, some statistics show that stress surrounding retirement planning can lead to depression.
If you’re paying attention to every headline or breaking news alert that claims we’re on the cusp of financial Armageddon, then you’re quite possibly sabotaging your retirement. The media thrives on sensationalism and the ability to raise the threat level gets more viewers. As the saying ‘a watched pot never boils’ indicates, impatience seldom produces instant results.
This is why I recommend a passive management approach to your long-term retirement planning. Constant buying and selling as you try to time the market causes you to make poor decisions at the wrong time and pay your brokerage firm for doing so. Turn off the media hype machine and keep the focus on your retirement goals. Establish a strategic plan around the things that you can control, and don’t buy into the sky-is-falling rhetoric.
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Calculate your future needs
Speaking from a mom’s perspective, the years fly by fast! That’s why it is so important to start anticipating tomorrow’s needs today. Decide on the income that you will require to maintain your current standard of living and then determine how much you’ll need to save monthly in order to reach that number.
When running your calculations, remember to include inflation. What your $500k nest egg buys you today, won’t have the same purchasing power 20 to 30 years from now. There’s no way to know what hand life will deal us, but it is far better to be over prepared and not need the excess than to have needs go unmet due to lack of preparation.
Not sure if you’re on track for retirement? Click here to try our free resource and find out where you stand.
Take advantage of employer matched contributions
We all like free money, right? Take advantage of your employer-sponsored retirement plan by contributing as much as you can, being sure to contribute enough to get the employer match. Your regular contributions, coupled with your employer contributions, will help your retirement account grow significantly faster. By leaving the company match on the table you are essentially turning down free money. If you’re not taking advantage of this benefit, figure out what the company policy is, and at the very least contribute enough to get the full match.
If you’re fifty or older, you have even more incentive since the IRS catch up rules allow you to increase the amount of your contribution in an effort to “catch up” your retirement account balance.
Eliminate debt
There are so many uncertainties with regard to retirement, you don’t want to further complicate matters by bringing debt into the equation. Having debt hanging over your head can really put a damper on your retirement. Make it a priority to pay off your student loans, credit cards and mortgage before you retire.
Work with a professional
Working with a skilled financial professional can help bring about a sense of calm to your financial matters. A Certified Financial Planner™ can assist with a comprehensive strategy to reach your specific goals, and make sure you are taking full advantage of the opportunities available to you.
To revisit the ‘watched pot’ idiom, while watching may not cause water to boil, ignoring it entirely might cause the water to eventually boil off and dry up. Don’t stress over the day-to-day financial uncertainty, but also don’t ‘set it and forget it.’ Instead make retirement planning a priority, calculate your future needs, and revisit your plan at least annually to take advantage of market opportunities and make updates based on changes to your personal situation. Several years from now, you’ll be glad you did!
Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.
Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.