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If you had the chance to double—or even quadruple—your retirement savings, you’d probably jump at that opportunity, right? Well, there’s one simple change you can make today that’s sure to boost your retirement savings.
What’s the secret? I’d thought you’d never ask!
Quadruple Your Retirement Savings? Really?
An HSBC study of worldwide retirement saving habits discovered that people with some kind of retirement plan have more than three times as much in their nest egg than those with no plan at all.(1)
And savers who take it one step further by working with an investing advisor to put their plan to paper? Their average nest egg was a whopping 445% bigger than non-planners.(2) That’s a big deal!
Understand & Own Your Investing FutureGet Started
Why is a retirement plan so important? Because it gives you a clear path to success. And that plan is all most people need to take action. So let’s create a retirement plan for your future!
This savings plan will have three phases, and you can forecast your financial situation for each one today. Think of it the same way you do your budget. You’re making a plan for your money before you actually have it, based on projections for your income and expenses.
It’s important to start with a solid financial foundation, so the first phase begins as soon as you are debt-free and have saved three to six months of expenses in your emergency fund.
Phase One: Simply Save
In the first phase, you’ll invest 15% of your income in good growth stock mutual funds through tax-advantaged retirement savings plans such as your employer’s 401(k) and a Roth IRA.It may not sound like much, but if you don’t follow through on this step, you won’t have any savings to make decisions about down the road.
Your goal is to consistently invest for retirement as you focus on other financial obligations, such as funding college for your kids and buying or paying off your home. A couple with the household median income of $56,000 could have around $900,000 for retirement if they invest 15% of their income for 25 years.
Related: Learn more about retirement. Check out the Retire Inspired Podcast.
Phase Two: Dig Into the Details
Now it’s time to envision what your retirement savings will look like by calculating the income your nest egg will bring. This is where an investing advisor comes in handy.
Ideally, you should be able to live off the growth of your retirement savings rather than depleting your nest egg. An investing advisor can run projections based on your monthly contributions and expected retirement age, making sure to account for inflation and any taxes or fees that may apply down the road.
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You should also develop a backup plan in case life throws you a curveball along the way. With careful monitoring and some modest adjustments in years with low returns, you can be confident that you can retire with savings that will last throughout your golden years.
Phase Three: Retirement Savings Reality
Using your monthly budget, compare your current expenses to your retirement savings projections to see where you stand. With an empty nest and a paid-for home, you can plan to ramp up your retirement savings if necessary. Based on your forecasts, you can answer several questions: What is your retirement dream? Will you need (or want) to continue working? Will you sell your home? What will you do for fun? What about medical expenses and long-term care?
Remember, too, at age 60, most people will need to purchase long-term care (LTC) insurance. LTC insurance will protect the money you’ve saved for retirement by helping pay for the expenses of a nursing home or in-home care if you need it. Keep that in mind as you estimate your retirement budget.
There’s Power in a Retirement Plan
While there is no guarantee that a retirement plan will make you a millionaire or give you a perpetually rosy outlook, it certainly won’t hurt your chances for a confident future!
Need help? It doesn’t cost a thing to just sit down with a pro and discuss your options. A SmartVestor Pro can help you understand your investments and come up with a retirement plan for your specific situation.
What are you waiting for? Find a SmartVestor Pro today!