Your Retirement Savings Goal
Setting a retirement savings goal is one of the most important parts of financial planning. However, once that goal is calculated, it may seem unattainable. In this article, you will find helpful tips on small, easy things you can do that will allow you to reach your retirement savings goal successfully.
Break It Down
The easiest way to conquer your retirement savings goal is by breaking it down. Put your goal into monthly amounts, this way it may seem less overwhelming and more manageable. It also gives you smaller goals that will serve as mile markers towards reaching your retirement savings goal. This will hope you to stay on track and mark your progress.
Make Saving a Priority
In addition to your monthly savings goals, it is important to put a little extra towards your retirement whenever possible. You may want to consider putting some of your tax return, your raise or promotion, or an unexpected windfall towards your retirement savings. It is also a good idea to reallocate funds towards retirement savings that were once going towards something else. For example, when you pay off a credit card or loan or finish paying a child’s college tuition you may want to put those payments towards your savings instead.
Another easy way to reach your retirement savings goal is to increase the amount you contribute to your qualified account by 1% each year until you reach your maximum allowable contribution. This increase in savings will be barely noticeable in the short term, but it will help you immensely in the long run.
Budget and Plan Ahead
An important part of retirement planning is budgeting and finding ways to lessen your expenses. This may be something simple like cutting down on the number of times you eat out each month. Or you may want to do something more major, like moving into a smaller home or moving to an area with a lower cost of living. You may also think about cutting down on the number of vehicles you have. Another way to save money is by doing household chores, such as mowing the lawn yourself instead of hiring those jobs out. Really focus on what you are saving for. Whether that be a lifetime holiday with a private jet trip (booked on Jettly for example), or finally buying the handbag you’ve dreamed of – cutting back on everyday costs will really benefit you in the long run. Little cutbacks here and there can mean a lot for your long-term saving.
Remember – Retirement Goals are Based on Assumptions
It is important to keep in mind that the calculation of your retirement savings goal is based on certain assumptions that will change over time. It is important that you take these fluctuations into account and regularly review your financial plan to refine these assumptions. They include:
- Inflation: Typically, an assumed inflation rate is used when calculating your projected retirement savings goal. This amount is to account for the rising cost of living. This inflation rate is usually somewhere around 3% a year. However, there are years where the cost of living may spike substantially. Unfortunately, there is really no way to predict such an instance.
- Rates of Return: Rates of return can be estimated, but they fluctuate and there is no guarantee that you can consistently earn the same rate every year. Some years you may earn more and others you may earn less. This is where the importance of having a diversified portfolio comes in.
- Life Expectancy: Your life expectancy determines how long you need your money to last. However, you may end up living longer or shorter than guessed.
- Salary Adjustments: A financial planner can include assumptions for any pay raises that you may receive. These changes may impact the amount you saved in an employer-sponsored plan.
- Retirement Expenses: Your retirement expenses are easier to calculate accurately the closer you are to retiring. You also need to account for large future expenses that may catch you off-guard.
- Social Security, Pension, and Other Benefits: Your savings goal should account for other benefits that you may receive. These amounts are dependent on your earning history and will be more accurately calculable the closer you get to retirement.
You Can Reach Your Retirement Savings Goal
It is possible to reach your retirement savings goal. Break your goal down into smaller more manageable goals, make saving a priority, and always plan ahead. By doing these things you can guarantee yourself a successful retirement. You should also meet with your advisor for an annual financial review. This will help you to mark your progress, refocus your goals, and recalculate variables. No matter how large or small your retirement savings goal is, do not give up.
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