We’ve all heard different rules of thumb when saving for retirement.
“You need $1 million saved for retirement.”
“By the time you’re 30, you should have one year of your annual salary saved.”
“Have 25 times your planned annual spending saved before retirement.”
You’ll notice the examples above are all focused on the retirement account balances - the dollars and cents. What is not considered in those “rules” are your goals and dreams for retirement.
It’s not your fault we’ve been conditioned to focus on the numbers in the statement. Our job as financial advisors is to translate that number into the life you plan to lead in retirement. We help clients reframe their mindsets around their retirement savings every day and truly see that it’s not about how much you save - it’s how you plan to use it.
Here are our three steps to reset your relationship with your retirement accounts:
Set Goals to Map Your Dream Retirement
Getting people to think about retirement in terms of goals is the first step. The most common goal we hear from clients is to travel, followed by completing home renovations or purchasing a vacation home, having the time and money for hobbies and lastly, doing all of the things you want to do before your health prevents it.
Whatever your goals, having them written down can help you see that the money you're putting away for the future will go to fund those dreams. And truthfully, some people have modest retirement goals that don’t require millions of dollars to be saved before they retire. Some people just want to see and do things throughout retirement and then leave behind assets for their family. That may take more savings than others.
Having a customized financial roadmap is crucial to planning your future. When you set goals, you can build a plan that shows you how you will get to those goals and how your retirement accounts will help get you to your dream retirement over time.
Learn to Make Good Financial Decisions
Once the roadmap is in place, the second step is educating clients on how much money it will take to help accomplish those goals. A lot of what we do is coach clients to make good financial decisions.
If you have really ambitious retirement goals but are unwilling to save more or invest differently, you may find you won’t be able to accomplish everything you want because you haven’t saved enough. That’s where we as advisors come in to help clients understand the correlation between their retirement savings and their goals and dreams, as well as educate them ahead of all financial choices and savings options so they can make more knowledgeable decisions.
When everything clicks, people can make those decisions on their own, which makes a huge difference. Dealing with money is a series of financial decisions. One bad decision can lead to a series of bad decisions. If a good decision is made, it can make a huge difference over the years as the results of those decisions compound.
We want clients to not focus on a dollar amount but on what the dollar amount is going to do for them. Financial decisions are not about growing the pile of money indefinitely but about what that money will accomplish in the future for them.
Understand Investments are Fluid
People aren’t taught about financial plans, so they focus so much on their retirement account balance. We believe people focus on the balance because it makes them feel in control. One account balance feels like it can be controlled.
But when financial planning, all inputs and investments are much more fluid and involve things outside of someone’s control, like taxes. The tax code changes often, which we can anticipate when planning for a client’s future. That's a fluid part of financial planning. There are market ups and downs, which is a fluid part of investing. The cost of living and inflation constantly changes, which is another fluid part of investing for the future.
Even a written retirement plan can start to feel somewhat intangible. It can feel a little abstract compared to one account balance. Although a plan can feel abstract, it’s really showing how the fluidity of investment will still get you to your dream retirement. There is an acceptance of fluidity we help clients work toward as we plan their future.
In reality, all the retirement rules of thumb in the world can’t tell you how much you need to save to have the retirement of your dreams. That’s up to you and your financial advisor to figure out and plan based on your unique goals. To start planning your financial future, schedule a meeting at zephyrusfs.com. Stay connected to us and the latest financial news by following us on Facebook and LinkedIn.