When it comes to retirement, Americans aren’t too sure about how to get where they’re going. According to a recent Federal Reserve report, nearly half of respondents were either “not confident” or only “slightly confident” in their ability to make the right investment decisions in their retirement accounts. In a recent Bankrate survey, “not saving for retirement early enough” was the most popular financial regret. And 40% of Millennials don’t have a single retirement savings account, according to a survey from online financial advisory firm Personal Capital.
Even people who seek professional help don’t always take their financial planners’ advice. If they did, here’s what financial planners would suggest:
Start now.
“If there is one thing I wish individuals would do, it is seek help early. I meet too many that regret not starting sooner. It is far better to get going on the right path than to realize all of the missed opportunities later in life.” –Robert Schmansky, CFP, Livonia, MI
“I work with a lot of younger clients—recent grads, newlyweds, young families—and one thing I share with them is that things only get more complicated. Meaning, if you think it's hard to save now, wait until the kids are playing soccer and the house needs new carpeting and you're trying to save for college. In other words, save as much as you can now, because you never know what your future holds.” –Beth D’Andrea, CFP, Malvern, PA
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Set some goals—and mean it.
“Most financial plans fail because clients either lack clear goals for their retirement or they fail to align their finances to accomplish them. When clients lack goals, it’s hard for them to plan. Or people have clearly defined goals for retirement, but they aren’t willing to substitute short-term gratification to achieve their long-term goals. We tell clients, ‘You can do anything you want to do, you simply can’t do everything.’” –Kevin Reardon, CFP, Pewaukee, WI
“I really would like to see people actually make a plan, rather than haphazardly approach retirement saving. A little planning would make a big difference. The second thing would be to implement the plan after it is made. Some people do go through the planning process, only to then let their accounts languish afterwards, rather than following the advice they've been given.” –David Shotwell, CFP, Ann Arbor, MI
Save more, and save smarter.
“I wish that people would put more away. I know when I was younger I was putting away 10%. It would not have hurt me to put away 15% instead. My kids save 40%, thank goodness.” –Chris Chen, CFP, Waltham, MA
“People definitely need to prioritize retirement savings over college savings. Ideally, you can do both, but if not, retirement should come first. It may sound selfish, but there are no loans, grants, or scholarships for retirement and while it is nice to be able to give your children the "gift" of no student loan debt, it is less of a "gift" if they ultimately have to support you during retirement.” –Ryan Fuchs, CFP, Frisco, TX
“The biggest thing that clients must do is to automate their savings. Life is increasingly busy, especially for working professionals, which makes it all the more important to ensure that good habits are automated so that consistent, long-term savings occur and put individuals in a good position to retire or reach financial independence. If clients aren't, we are certainly working to help them automate this process through payroll deductions, automatic transfers to IRAs, etc.” –Matthew Cosgriff, CFP, Minneapolis, MN
“I wish clients would save and invest just as much money outside of their pre-tax retirement plans as they do in them. Uncle Sam does come back for his money and when you are dependent on pretax money, large annual distribution amounts can create higher Social Security taxation, higher capital gain taxation and higher Medicare premiums to name a few.” –James Bryan, CFP, Edina, MN
Plan for future healthcare costs.
“I wish clients would fund a Health Savings Account in order to have a sum to assist with healthcare cost in retirement. The average healthcare cost for retirees is running about $7,000 per year per person. Since you cannot fund an HSA when on Medicare, it behooves a client to enter Medicare with a sizable balance in an HSA to assist with these cost using tax-free funds.” –Robert Wesley Shannon, CFP, Hurst, TX
“HSA annual limits are not affected by contributions to other retirement accounts. That means an individual can max out a 401(k) and still max out an HSA. This is especially beneficial for savers in their peak earnings years looking for more tax deductions and/or needing to catch up on retirement savings. And even if you somehow never need medical care—highly unlikely—you can access your HSA after age 65 without penalty. You'll just owe taxes. In that regard it's very much like your traditional IRA or 401(k) if need be, but with taxes forgiven if used for medical bills.” –Randy Bruns, CFP, Downers Grove, IL
Work a little more.
“We wish more clients would consider working an additional year or two, during which time they would save more and delay tapping into their nest egg. Simulations we have run show that can significantly reduce the possibility of running out of funds during their lifetime.” –John Eckel, CFP, Simsbury, CT
“Stop thinking one million dollars is a lot of money so you have nothing to worry about.” –Georgia Bruggeman, CFP, Holliston, MA
Be shrewder about spending.
“Resist the urge to replace your car the minute it's paid off. Of course, safety and reliability are number one. I wouldn't anyone to be in a difficult situation. But there is something to be said for not always having a car note.” –Marguerita Cheng, CFP, Potomac, MD
“Do you need to make any home improvements? If so, do them while you still are working because the stress of paying for large expenses during retirement can cause buyers’ remorse.” –Andrew Tate, CFP, Minneapolis
“Don't get in over your head in college debt for your kids. A $200,000 private school degree is not a cost effective way to become an elementary school teacher. Do a cost benefit analysis and be smart about spending for your kids’ college.” –Kristin Sullivan, CFP, Denver, CO
Imagine your future.
“I wish people would spend more time envisioning what their retirement ‘hours’ would really look like. Many don't really think it through. They think they'll be nonstop travelling, golfing, etc., when in fact things turn out to be much more mundane, like babysitting grandkids and watching too much TV. This often leads to friction due to boredom and loss of identity.” –Leslie Beck, CFP, Wood Ridge, NJ
“Many studies show the happiest retirees are those who have spent the most time figuring out how they are going to spend their days when they aren’t in the office. Start envisioning how you are going to spend your time when you aren’t working any longer.” –Mitchell Kraus, CFP, Santa Monica, CA
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