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Do you know people who are retiring with a healthy nest egg? Do you want to know how they did it?
First off, they’re probably not financial wizards who hold secret formulas to retiring well. They don’t watch the stock market every minute of every day or maintain complex portfolios.
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On the contrary. Retirement-ready people are usually average, hard-working folks who’ve made consistent contributions to their saving plans over the years. They’re responsible spenders and intentional savers. And they’ve also used the help of a qualified professional along the way.
So what does that look like in everyday life? What are the real secrets to saving for retirement successfully? Let’s look at some real-life habits and characteristics of investors who are winning with their retirement and see how they can work for you too:
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- They use their biggest wealth-building tool to their financial advantage. Smart investors take advantage of their biggest wealth-building tool: their income. No matter how large or how small their household income is, every dollar has a purpose. They also understand that living debt-free gives them the freedom to do more with their money—like plan for the future.
- They watch small expenses. Retirement-savvy people stick to their monthly budget. They are conscious of how much they spend on groceries, dinners out and new clothes. If they run out of coffee money before payday, they drive past the coffee shop to avoid overspending—even if it’s just a couple of bucks at stake. They know the small, everyday choices make the biggest difference in the long run.
- They invest 15% of their household income. After they stash away $1,000 for emergencies and save three to six months of expenses, smart investors allocate 15% of their household income to retirement. By investing 15% of their income, they’re able to make real progress toward a secure retirement while still working toward other financial goals like saving for their kids’ college and paying off their mortgage.
- They don’t fund-hop. Informed savers don’t play checkers with their investments. They don’t jump from one investment to another in reaction to or anticipation of stock market changes. They understand that mutual funds with a solid history of growth are historically a great investment choice to stick with for the long haul.
- They meet regularly with an investing professional. Wise investors know that a qualified professional is worth their weight in gold. In fact, a Ramsey Research report revealed that those who work with a pro are more likely to have a six-figure nest egg: 44% of investors who use a professional have $100,000 or more saved for retirement versus just 9% of those who go it alone.
- They have a plan, and they update it as needed. People who are good with investing know where their money is going and how much it’s growing. They keep tabs on their investments through annual check-ins with an investing professional. They also meet with their pro after big life changes like a new baby, job transition or family move to review the potential impact to their savings plans.
- If they’re married, they work as a team. Couples who are winning with investments are on the same page when it comes to money. They work as a team and win as a team, deciding together on their money goals and how they’ll reach them. Many financially successful couples aren’t just focused on getting ahead; they’re also fueled by mutual desire to be generous.
- They don’t borrow from their 401(k) plans. This is a biggie. Borrowing from your 401(k) account might seem like a great way to come up with some cash for an unexpected expense. But successful long-term investors know a 401(k) loan comes with risks like potential taxes and penalties if you can’t repay the debt. Even worse, the loss of long-term compound growth on the money you borrow could add up to thousands. Smart investors make sure they have a solid emergency fund in place to take care of unexpected expenses, so they can leave their retirement savings to grow over time.
- They buy long-term care insurance. Investors with a healthy nest egg understand the importance of purchasing long-term care insurance. A long-term illness could cost a family hundreds of thousands of dollars in medical expenses, especially if care requires a lengthy stay an assisted-living or skilled nursing-care facility. Long-term care insurance will help cover those expenses so you don’t end up spending your retirement savings for long-term care.
- They live below their means. You won’t find savvy investors spending more money than they make. They buy modest houses and pay cash for vehicles and vacations. This leaves enough money to stash away for retirement. They don’t need the latest and greatest gadgets because they don’t care about keeping up with the Joneses. They are content with what they have, which helps keep their priorities in check.
Winning means planning. But it doesn’t mean stress.
Retirement-savvy folks are just normal people whose only formula for success includes good ol’ determination, financial discipline and wise direction from a professional. They understand that retiring well doesn’t need to be complicated.
Are you ready to get started and want some guidance from a qualified investing professional? Contact a SmartVestor Pro in your area to get a plan in place!