As we think about retirement, one common goal is to make sure the money lasts as long as we do. With that in mind, here are five tips to help make sure your money lasts.
- Calculate your net worth. If you look at everything you own and subtract all the debts you owe, the remainder is your net worth. When you calculate your net worth you get a good picture of what you have of value and who you are paying every month to reduce your debt. Clarifying these relationships can be a big help to highlight your priorities. When you reduce your debts, suddenly you have significant money to add to savings and your net worth can increase rapidly.
- Maximize employer-sponsored retirement savings. While you are still working, the goal is to pile up as much retirement savings as possible. Work retirement savings are an excellent tool. They make it convenient to save from your earnings before you even see the money. And most plans offer employer matching money to add to your savings. So be sure to save enough to get all the employer matching funds available. Usually, somewhere between 4 and 6 percent of your gross pay will get you all the employer money. And if you can, save 20 percent of your gross pay to speed your time to retirement.
- Create a savings and spending plan. If you are carefully monitoring your income and your spending, you have a lot of great information to help improve your financial situation. This is another way to clarify spending that might be draining away from your retirement savings. And sometimes, it reveals that you have more money to save than you realized. Understanding your spending needs while you are working is the first step toward accurately predicting how much you will need to spend when you retire. That knowledge is a foundation block to a successful retirement income plan.
- Avoid hidden fees. Sometimes we own investments that are more expensive than we realize. For example, some annuity products can have 2 percent or more in baked-in expense. For some situations, those fees are buying valuable features, but often they do not provide significant value. It’s prudent to review every investment account, insurance contract, IRA or annuity and understand the fees you are paying. Money paid in fees is money you don’t get to invest and it’s money you can’t use to fund your retirement.
- Consult an experienced, highly trained, fiduciary financial planner. Working with a well-trained and dedicated professional can help you create a holistic financial plan that covers all aspects of your financial life and will lay the groundwork for a successful and stress-free retirement. A great place to start looking for the right advisor is to talk with a couple CERTIFIED FINANCIAL PLANNER™ professionals.
To find a CFP® professional near you, start your search here.
As you visit with financial planners, I suggest a couple things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor only paid by clients, not any financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-only, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.