It’s no secret we are facing a retirement crisis in our country. We’ve written a number of times on the subject, including the staggering statistic that 71% of middle-income people don’t have a written retirement plan. In particular small-business owners save very erratically, and there are several articles on the unique pressures they face.
Whether you do it yourself or hire a professional to assist you, retirement isn’t impossible for the majority of us. All too often we get consumed by busy schedules, and are so busy living life, we unknowingly sabotage our own retirements. Sound familiar? If not you’re in the minority and are to be congratulated!
Let’s look into 7 specific areas of your situation to see if you’re doing harm to your goal of a comfortable retirement:
1. The Immortality Syndrome – thinking there is always tomorrow
If you find yourself constantly putting your future in last place by putting off saving, the chances of retiring well go markedly down. A comfortable retirement generally takes years of disciplined savings. We call it Paying Yourself First. There are ample examples that illustrate the power of beginning early because of the compounding effect. Bottom line, the sooner you begin saving, the more time your money has to grow and be available for the kind of retirement you envision.
2. Working Fewer Than 35 Years
This may sound like a no-brainer, but many people don’t understand how Social Security works. You could be substantially shortchanging your future Social Security benefits without even knowing it, especially if you choose to retire early. The reason is your monthly benefits are calculated on your 35 highest annual earning years. Simply, if you work fewer than 35 years, you get a ZERO for those years you didn’t work, and those are averaged into the calculation. The Social Security website has a Retirement Estimator you can go to and calculate your estimated benefit based on your actual earnings.
3. Use Hardship To Your Advantage
Everyone faces challenges and hardship, but it’s what they learn from it that makes a difference. It’s normal to make mistakes in some of your financial decisions. The key is both to learn from them and not continue making the same mistakes twice or more. If your results are negative, look for other ways of doing things. An example if you’re married may be delegating certain things to the spouse with a skill set and success in those areas. This could be budgeting, investing, paying bills, etc.
4. Hire A Coach
According to an article in Forbes, “no athlete makes it to the Olympics without a coach. The role of a coach is vital to high-performance teams. Unfortunately, many times couples decide to do it on their own. We don’t know what we don’t know, so hiring a competent financial planner may make all the difference in the world when it comes to meeting financial goals.” They went on to say “the role of the planner is valuable even just taking into account the process of setting goals and reviewing them regularly.” You can find a CERTIFIED FINANCIAL PLANNER™ at the CFP Board, the Garrett Planning Network, or the National Association of Personal Financial Advisors websites.
5. Lifestyle Inflation
What we mean by this is spending more every time you get a raise and your income increases. It is human nature to celebrate your achievements by adding to your lifestyle. While we aren’t advocating hoarding money, we do recommend being aware of this. Recognize the importance of your future as your paycheck grows.
6. Not Watching Your Credit Score
There are many ways to ruin your credit score without even knowing it. Your credit score is similar to your reputation…a lifetime of good can be undone quickly and become a negative. This can impact many financial areas of your life, including mortgage payments, car payments, etc. Guard your credit score jealously, and take a look at this article from Personal Finance Mastery for “10 Ways To Ruin Your Credit Score Without Even Knowing It.”
7. Work As A Team
Think about it…every team has a purpose. Spend some time with your partner to determine what your purpose is. Work together to develop wealth-building strategies, and putting your blueprint in writing greatly increases the probability of success.
As we consider how much money slips through our hands over our lifetime, it’s rather staggering. An average worker will make over a million dollars in their working career. If you put some thought into your retirement early on, you can harness more of these dollars toward retirement. Even relatively small savings adjustments can have a huge impact over time. Think about how much flexibility and freedom that gives you, both before and after retirement. You can do it!