When it comes to the topic of retirement planning, most tend to see it as a chore. It’s a tedious task that you add to your checklist of “Things I Know I’m Supposed to Do When I’d Rather Be Doing Something Else”. This feeling is completely natural.
For many, funding short-term goals, especially in today’s economy, may seem more useful than saving for something years down the road like retirement. But the thing is, that feeling you’d rather use your money for more immediate wants and needs will never go away, just as the need for savings in retirement doesn’t go away, either. This may sound gloomy, but I have some good news to share. You already know it’s never too early to start saving, but it’s never too late, either. Let’s dive a little deeper…
We go through three phases in the financial planning world of “retirement savings” as we move through our lives: Wealth Accumulation, Wealth Preservation, and Wealth Distribution. You will hear over and over from a young age, “It is Never Too Early to Save for Retirement” and I’m here to tell you the proof is in the pudding.
During the first stage of planning, Wealth Accumulation, even the smallest of increments can go a long way. The power of compounding interest is an incredible tool to help you take control of your retirement savings. For example, someone who invests $200 a month, whether it’s in a 401(k), IRA, SEP, etc., starting at age 25 could accumulate more than $500,000 by age 65, assuming a 7% average annual return. Now add in more savings over the years as your income increases, and you’ve got a compounding interest snowball of success rolling towards your retirement.
As I mentioned, this ideal world of saving for retirement at a young age isn’t always appealing, fun, or, for that matter, even possible. As a young man myself, believe me when I say I’ve got things I’d rather be putting my paycheck towards! For that reason, we can often end up in a situation where we reach the Wealth Preservation phase (when we have shifted to protecting and locking down our assets leading into retirement) or even the Wealth Distribution phase (when we’re pulling from those assets) with little to no savings built up.
While this sounds like a nightmare scenario, chances are good it’s not too late to put together a solid savings foundation for your retirement. The most important thing to do in this situation is start. You have multiple tools at your disposal to bring your retirement savings up to par before retirement. From catch up contribution limits and social security strategies to, most importantly, working with a financial advisor, what seems like a worst-case scenario may be remedied through teamwork and financial discipline.
Scheduling a meeting with a financial advisor will allow you to see the “big picture” of what retirement currently looks like for you, to set goals for what you would like it to look like, and to form a relationship with a team whose members will work alongside you to meet your goals.
Please feel free to reach out to any of our advisors at Rea Wealth Management, no matter which stage of retirement planning you may be in. We’re happy to assist in any way we can through the journey of retirement planning. We hope to see you soon!
By Max W. Feller
Financial Advisor
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation. Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.
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