When it comes to achieving your dream retirement lifestyle, the single most important factor is the age you begin setting aside your retirement savings. The earlier you start saving for retirement, the better. The longer you wait, the harder it becomes for you to achieve your financial goals.
Ideally, you’d begin your retirement savings when you enter the workforce, in your early 20s or even younger. This gives your money over 40 years to accumulate and take advantage of compounding interest. While it’s never too late to start saving for retirement, you may need to be more aggressive and strategic to stay on track.
If you’re concerned that your retirement savings isn’t on track, it’s a good idea to consult with a financial advisor to see if there’s anything you haven’t taken into account. When people own a business, for example, they often forget to include some of its value in their retirement planning.
Here’s an example of how a couple used an aggressive, creative strategy to get their retirement savings back on track. Fifteen years ago, an entrepreneurial, professional couple was running their own veterinary practice. They loved the business, but were tired of working and wanted to move to the next phase of their lives.
When they came to Richard Brothers for financial advice, they didn’t have a good idea of the value of that business or how to realize that value, apart from liquidating it and referring their clients elsewhere. In addition, their clinic was on land that had environmental issues due to fuel tanks buried on it.
We put together a three-year action plan that included selling their business and selling the clinic. With a lot of careful planning — and some luck — they sold the practice and the building to an employee. We were also able to mitigate the environmental concerns and recover the costs from the oil company. At the end of their three-year action plan, the couple retired to Colorado with about $3.5 million saved for retirement, and they couldn’t be happier.
5 Tips For Getting Your Retirement Savings Back On Track
If you’re getting a late start on your retirement savings, here are five tips to get on track:
- Develop clear and attainable financial goals: While there are many “rules of thumb” that could be helpful, each person’s situation is different. Setting goals that are right for your circumstances is an important first step in retirement planning.
- Take full advantage of your company-sponsored retirement plan: Many companies provide employees with 401(k) plans or similar options as part of their total benefit package, and many offer matching contributions in addition to your own savings. If you don’t currently get the maximum employer match, you’re leaving money on the table.
- Make catch-up contributions to your retirement investment accounts: At age 50, the IRS currently allows you to contribute an extra $1,000 to your IRA each year, among other catch-up options. Annuities are another way to benefit from tax deferral and save beyond the IRS limits.
- Plan for the unexpected: Layoffs, disability and a death in the family are just a few unforeseen incidents that could negatively affect your retirement. Planning for these events gives you peace of mind knowing that you’re taking care of your loved ones.
- Reach out to your current network to start building a financial team: People tend to lean on friends and family for financial advice. A better approach would be to start conversations within your current network of professionals and gather information from them on how to create a strong financial team and strategy.
Worried you’ll outlive your money? Request a free, 30-minute consultation with Richard Brothers and start planning for retirement.
