Dreaming of Retirement Won’t Get You There

You’ve probably heard the saying, “If you aim for nothing you’ll hit it every time”. Some would say, “Of course! That’s obvious.” Yet when it comes to retirement planning most are doing just that.

Most people hope that by the time they turn 62 or 65 they will be retired and living the life they’ve always dreamed of. Stop right there. Dreaming and planning aren’t the same. Don’t get me wrong. As my wife always tells me, it’s good to have hopes and dreams, but a dream without a plan is just a wish. Just wishing is like aiming at nothing with the expectation of hitting something.

I’ve worked in the field of financial advising for more than 17 years now. In that time, I’ve never met anyone who has said their life-long goal is to get to retirement only to find out that they can’t afford to retire. In reality, most would say that they want to retire with dignity. They want to spend time doing the things they’ve always wanted yet never had the time to do. Would you agree?

How are Americans doing with retirement planning?

According to the Social Security data in March 2018, the average monthly benefit check was $1,404.91. That comes to $16,858.92 over the course of a year. According to the Government Accountability Office (GAO), around 29% of households age 55 and older have neither retirement savings nor a pension. In fact, research by the Federal Reserve found that the median retirement account balance in the U.S. (looking only at those who have retirement accounts) was just $59,000 in 2013. And according to the New York State Household Income Department of Numbers, the ACS 1-year survey shows that the median family income for New York was $80,114 in 2017.

An average American couple

So, let’s assume a married couple with the average household income wanted to retire at 80% of their gross household income. Their goal is $64,091.20. However, they have no retirement savings. They’re planning to live on two average social security checks per month and add a 4% withdrawal from two average 401k balances (totaling $118,000). Their first-year gross combined income is only $38,437.84.

So how are they doing in comparison to their 80% target? You be the judge.

Reflecting on your situation

A better question yet is, how are you doing? Based on the above hypothetical, things might be looking pretty good. But you might be thinking, I have no idea where I’m at or even where to begin.

Can I just go on record in saying that it doesn’t matter where you are at in comparison to others? After all, it isn’t someone else’s life you will live in retirement. What matters most is that you get a plan in place that you can understand and follow.

Getting started

Here are a few, though not all-inclusive, things that you can do in 2019 to get clear on your personal retirement picture:

• Create a household spending plan to get a grasp on how much is coming in and going out. The better control you have on spending, the more you can potentially invest and save.
• Get laser focused on strategizing how to eliminate your consumer debt (any debt outside of your mortgage if you have one). I have found that debt is the number one obstacle keeping people from investing for their futures.
• Seek out a trusted, well respected Financial Advisor to help you create and implement a solid financial game plan. They should be willing to coach you on how investments work. I believe it’s important that they have the heart of a teacher. They should help you understand what it is they are talking about. They should also be transparent about their compensation. And they should be willing to focus on the two suggestions above regardless of whether they’re getting paid or not if this is an area of need for you.

Make 2019 the year that you can look back on and see a difference. The financial plans you put in place this year will drastically change the trajectory of your financial future.