How to know you're on the right track with your retirement savings, according to a financial expert

How to know you’re on the right track with your retirement savings, according to a financial expert

Investing money for retirement can be daunting, especially since it’s common for future retirees to wonder if they’ll have enough money to see them through their golden years.

There are a few rules of thumb to help you determine where you are at with retirement savings. An analysis found that you would need to have at least your annual salary saved by age 30 to be on track for retirement at age 67. And by age 40, you should have saved three times your annual salary.

Another strategy uses the 4% rule to help people calculate their number of retirements: just multiply your annual expenses by 25 to find an “end goal” for how much money you need. before you can retire with enough money to last 30 years. .

But before you try to start crunching the numbers, there’s another important way to track the progress of your retirement savings — and it’s probably the first strategy you should turn to. Liz Sheehan, senior vice president of wealth management at UBS, recommends making a financial plan when you start thinking about retirement.

“Unfortunately, there is no shortcut,” Sheehan says. “A comprehensive financial plan is the best way for someone to know if they are on the right track.”

A financial plan can give you a clear idea of ​​where you are already meeting your goals and where you need to focus more. Part of developing a proper financial plan means being clear about the things you need do and want to do as you work toward retirement. For example, if you know you want to travel the world in retirement, you’ll need a lot more money to float those travel costs compared to a case where your ideal retirement looks more like a downsizing and moving to a low cost of living area.

According to Sheehan, there are a few questions you should consider when establishing clear goals and a retirement plan:

  • How do you envision your life and your family in 10 years? 20 years? 30 years?
  • If you didn’t have to work, how would you spend your time?
  • What would you like to accomplish with your wealth?
  • Are there any financial concerns you would like to address as part of the financial planning process? (i.e. do you want to buy a house and/or how to pay for your child’s college)

Of course, planning for retirement isn’t just about figuring out how much money to invest each month. You will also want to consider other areas of potential change you may encounter in life.

“Financial planning goes beyond basic budgeting and assesses topics such as insurance planning, liability management and estate planning,” Sheehan said. A financial plan should also encompass reviewing asset allocation, planning for children’s education (including how to pay school fees), charitable planning and insurance analysis, he explains. her further.

Of course, you don’t have to try to answer all of these questions and scenarios on your own. A financial planner can help you navigate the process at any stage of your life. You can also discuss the best tools to use to achieve your goals. For example, robo-advisors, like Wealthfront and Betterment, automatically adjust your investment portfolio allocation based on your goals and risk tolerance. So it could be a solid recommendation for someone who wants a more free-spirited, yet still personalized, approach to retirement. invest.

wealth front

On the Wealthfront secure site

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts

  • Costs

    Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront’s annual management advisory fee is 0.25% of your account balance

  • Prime

  • Investment vehicles

  • Investment opportunities

    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks

  • Educational resources

    Offers free financial planning for planning college, retirement and buying a home

Improvement

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. For example, Betterment does not require clients to maintain a minimum investment account balance, but there is a minimum ACH deposit of $10. Premium investment requires a minimum balance of $100,000.

  • Costs

    Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has an annual fee of 0.40%

  • Prime

    Up to $5,000 managed free for one year with qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

  • Investment opportunities

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment offers retreat materials and other education materials

Conditions apply. Does not apply to crypto asset portfolios.

“Financial planning is a process, it’s not something that’s done once in isolation and never revisited,” Sheehan says. “I suggest clients review their financial plan once a year or whenever life changes.”

At the end of the line

A financial plan is one of the most important strategies you can use to determine whether or not you are on track to achieve your retirement goals because the plan encompasses both the qualitative and quantitative aspects of your goals. If you’re not sure where to start to create a financial plan or even what should be included in your financial plan, a financial advisor or planner can help.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff alone and have not been reviewed, endorsed or otherwise endorsed by any third party.

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