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The average American’s retirement is longer than planned, both because people tend to retire earlier than expected and underestimate their life expectancy. It’s important to plan ahead by creating a long-term retirement strategy with short—and intermediate-term steps to accomplish your goal. If you’re getting started late, you can still get back on track by understanding what you need to do to catch up and getting help with accountability.
Key Takeaways
- Many retire earlier and live longer than expected, so planning ahead is essential.
- Building a financial plan helps define the gap between where you are and where you need to be.
- Catch-up contributions and expense evaluations are effective ways to close that gap.
- Even if you’re starting late, strategic planning and disciplined saving can get you back on track.
- Working with an advisor can provide accountability and help you make the right financial decisions.
What I’m Telling My Clients
Retirement planning is challenging for many reasons, perhaps the biggest being that you need to figure out how to turn your human capital (earnings) into enough financial capital to fund a multi-decade retirement. This requires setting appropriate savings targets and investing well. Starting earlier makes it easier to accomplish your long-term goals, but there are things you can do if you’re off to a late start to get back on track.
Important
The average U.S. Life expectancy is 81.1 years for women and 75.8 for men. With people living longer, saving enough is essential to fund your later years.
Build a Financial Plan
The first is to build a detailed financial plan to understand precisely how far behind you are. I call this defining the gap. Once you determine the gap and know what you’re up against, you can implement strategies to attack it and see how to improve your financial plan.
Evaluate Your Expenses
Some of those strategies might be using a retirement account catch-up contributions, tracking your spending carefully to finding savings in smaller spending categories that, in aggregate, can make a difference, and examining whether larger expenses like a second home impact your retirement plan.
Speak with a Financial Advisor
If you’re behind on a major goal, such as building toward a successful retirement, you could also benefit from engaging an advisor to help provide guidance and accountability to ensure you take the right steps to get back on track.
The Bottom Line
It’s not too late to take your retirement planning seriously if you believe you’re off to a late start. The key to getting back on track is building a plan to understand what you need to do going forward to catch up, looking at your spending in detail to see where there are opportunities to spend less and save more, take advantage of tax-advantaged ways of increasing savings, and getting advice or accountability to stay on track with your newly created plan.
