Is The Financial Tail Wagging Your Retirement Dog?

August 28, 2017

When someone asks you about your retirement plans, is your first thought to check your account balance? That could be holding you back from the life you dream of living in the interim years. Remember that money is there to support your life, not the other way around.

Here are 3 steps to help ensure you’re on track for retirement without letting it rule your life:

1. Forget about the money… for now. Money might limit some of the things we can do today, but it’s still just a tool, not a master. Make sure you’re using it the right way. Since the future is unknown, start by writing down everything you imagine your retirement lifestyle would be if you didn’t have to worry about the money:

  • Where will you live?
  • Where will you play?
  • Will you work or volunteer?
  • Perhaps a little of both, or neither?
  • Who will join you?

Consider the things you like to do and you want to continue doing regardless of your finances.

2. Compare the cost of your ideal retirement to the cost of your lifestyle today. To compare whether your ideal lifestyle will be a reality, use an Expense Tracker to help you review expenses over the last three to six months, then place a “plus” sign next to those you think will be higher (in today’s dollars) in retirement, and a “minus” next to those that will be lower.

Will you save money by not commuting to work anymore? Or pay less state and local taxes if you move? Websites like retirementliving.com and AARP.org offer a plethora of resources to help you with these details.

Now add up those pluses and minuses. Generally, more pluses mean your retirement lifestyle will be more expensive than your current one; and more minuses means it will be less expensive.

3. Run a retirement calculator. Once you have a better idea of what your ideal retirement lifestyle will cost, calculate if you’re on track for your goal or if you need to make up for any gaps. The sooner you know where you stand, the sooner you can make necessary adjustments like saving more, working longer, or re-evaluating your retirement ideals.

4. Make saving automatic. Make full use of your 401(k), which makes saving brainless and painless. If your plan offers an auto-escalator tool, enroll in that to have your contributions increased each year without you having to worry about making the change. To supplement your 401(k), set up a direct deposit from each paycheck into a separate savings account. That way you can relax, knowing that you’re accumulating savings, while enjoying the rest of your earnings to live for today.

Your retirement really is whatever you choose to make it. Let your dreams guide your actions, and you have a great chance at turning them into a wonderful reality.

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