Are You On the ‘If I’m Lucky’ Retirement Plan?

The other day, a friend asked me if contributing 18% of her salary into her 401(k) was enough to be saving for retirement. Instead of giving a simple yes or no answer as was expected, I had to answer with a question of my own, “Are you on track to retire?” Finding the answer to that question can seem complicated, but it doesn’t have to be. And unless you actually know whether or not you’re on track, it’s tough to make other financial decisions that may compete for your dollars.

For most of my peers, retirement is something in the distant future, perhaps even a mythical state of being, much like finding a four-leaf clover or happening upon a pot of gold at the end of a rainbow. Since it’s not something that can be easily envisioned, I find that many people employ what I call the “Wishin’ and Hopin’ Financial Plan.” It’s also known as the, “I’ll Worry About That Later Plan,” similar to the, “If I’m Lucky, I’ll Get There Plan.”

It’s Not About Luck

Saving for retirement, even in your 20’s and 30’s, isn’t just a crap shoot though. It’s something that you can actually calculate based on the way your life is today and update annually as things change. If you’re willing to “run the numbers,” you can at least have a solid idea of what you can do today to increase the likelihood that you’ll be able to retire comfortably when you want to.

Unless-you-know-whether

Financial plans, just like your weekend plans, are flexible. They are adjustable. And they should be adjusted, at least annually, for any changes in your life. Just like you would cancel your dinner reservations for Saturday if you learned that your best friend’s boyfriend was planning to propose and wanted you there for the surprise (true story), you can make changes to your financial plan when things like a job change or an engagement happen and affect your long-term plans.

A financial plan is really just taking a bunch of assumptions based on what we know today and projecting them out mathematically into the future, then seeing if what we’re doing today fits with the math. If it doesn’t, you can make changes to make it fit. Those changes include saving more, adjusting the age of planned retirement, and planning to spend less in retirement. It’s about so much more than hoping you “get lucky” and can retire at some point.

The reality is that someday you’re not going to be able to work anymore and for most of us, the day we don’t want to work anymore will come much sooner. And when that day arrives, you will obviously want to be able to afford to retire. And being able to afford retirement isn’t something that is controlled by your luck. You can do things today that will get you there – and if you are lucky, maybe you’ll get there sooner than you planned.

So what are you waiting for? Run that calculator today! Please let me know in the comments or send me an email if you have questions about how the calculator works. I can either answer it in a future blog post or give you a quick answer to set you on your way.

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