How do you know when you are saving enough for retirement? We get that question a lot. And the answer is different for each person or family. Why? Because every person and family is unique.
We work with professional families with college bound kids. Some have saved a lot for retirement; others have saved a lot for college; still others have other assets such as a business or inherited wealth that can change (or complicate) planning.
There have been a number of retirement gimmicks over the years: Saving a certain percentage of every paycheck; accumulating a certain dollar amount by the time you are 65; investing in a way that generates unusually large returns and there are others. These are sometimes useful for determining a general approach, especially if you have nothing else to go on. But we think these methods leave out too many important factors about your own situation.
The bottom line is that achieving a blissful, comfortable retirement involves a combination of efforts. There is no single “silver bullet” to guarantee a perfect retirement with unlimited cash resources. The fact of the matter is that household financial resources are typically limited so choices must be made along the way.
So, here’s the part you’ve been reading for: the true secret for having enough in retirement is…. saving….a lot.
If you are fortunate to earn a windfall because your employer is owned by a private equity firm and you are entitled to a share of the company when it goes public, congratulations. That can make planning a lot easier. But for others, the simple fact is that a comfortable retirement requires the following:
- Persistence – Saving regularly over a very long period of time.
- Saving more than you would like – By holding back on spending when you get that unexpected windfall—a large tax return, bonus, small inheritance from old Aunt Betty and permanently saving a good chunk of it (50% or more) for your future. Of course, the hardest part is deciding to ‘pay yourself first’ out of every paycheck. It is effective but it can be hard to maintain.
- Putting saving on autopilot – If saving requires you to do nothing every week or every month, it will just happen if you have set up an automatic saving or investment plan. If you have to do 3 steps every month, you’re setting yourself up for failure.
- Accepting boredom – Accumulating significant wealth takes time. That’s why it is so important to save a substantial portion of every windfall and save a portion of every paycheck. It is generally hard to save a lot of money in a short period of time. That’s why so few people actually do it. In the meantime, the waiting is boring, uneventful, long, and uninteresting.
There have been countless studies about saving for retirement but the ones I remember the most are the ones that confirm that the single most important factor to accumulating a substantial amount for retirement is sourced to the amount of money you save—and not the earnings on that savings.
I’ve met a few people who believe that they can invest their way to wealth. Perhaps they are the ‘rabbit’ and I am the ‘turtle’ but I am perfectly happy being the turtle because I like to win the race in the long run (there are many studies about ‘slow and steady wins the race’ in the investing world).
How do we do it? We look at everything (all facets of your lifestyle) and build a customized solution for the specific person or family. There is no simple answer that works for everyone.
More questions how to save enough for retirement? Give us a call. We’re here to help.
Lyman H. Jackson
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.