If you haven’t saved as much as you hoped by middle age, here’s how to start catching up.
During your working life, saving for retirement can easily fall to the bottom of your list of priorities.
When you started working in your 20s, you may have had fewer expenses but also a lower level of income. That might have limited your ability to save for a life stage that can seem so far away. In middle age, you might earn more money, but expenses have a way of keeping pace—especially if you decide to start a family. The costs of college tuition and weddings, as examples, can quickly add up.
There’s hope, however, if you started late or haven’t saved quite as much as you wish you had over the years. You can still fund a retirement that aligns with your lifestyle. But to do this, you’re first going to need a strategic financial plan. And that plan needs to be tailored to help you meet your unique goals.
Define Your Goals
“The most important thing is understanding how our clients envision their retirement,” says Melissa Saltos, a Wealth Advisor with Regions Bank in Miami. “The very first question we ask when creating a client’s financial plan is: What do they want their money to do for them?”
Start by simply thinking about your retirement. Knowing your goals is a key step to creating a plan. As you start a conversation around retirement, you should have some of these answers sorted out.
- What does your retirement look like?
- Do you have higher expenses or lower expenses?
- Have you downsized or moved to a new location?
- Are you continuing to work part time, or have you started a second career?
- Have you committed yourself to new hobbies, including travel?
“It can be very helpful to define your goals, but remember that they may change over time,” says Saltos. “You need to update your plan to reflect your individual family’s needs and changing priorities, as they arise.”
Make a Financial Plan
After considering what kind of life you want to live in retirement, you should look closely at your finances. Review your savings balances and debts. Consider all your current and future sources of income and your personal expenses. These elements—how much money you have coming in and going out—come together to form your budget.
You will need to match your finances to your retirement goals. From there, you will get a sense of what the gaps are in your plan. Where will your current finances fall short? That will help you to create a retirement savings plan that is tailored to your unique situation. At this point, it can be helpful to talk to a financial planner or a banker at a Regions Bank branch. They have experience charting retirement goals against existing budgets.
Your retirement roadmap should take into account at what age you’d feel comfortable retiring—financially and psychologically—and when it makes the most sense to begin taking Social Security.
Explore Your Options
Where to start? Here are a few key steps you can take to ensure your plan is on solid footing.
- Review all the assets you currently own. That might mean reviewing the statements for your 401(k), where your assets are stocks and bonds. It might also mean looking at savings accounts. Knowing where you stand is a good starting point.
- Define your comfort with risk, which will help you to build out a portfolio that will allow you to sleep at night.
- Review and adjust your asset allocation. Do your assets reflect your goals and your appetite for risk? If not, it is time to adjust.
- Think about how to best handle your debts and liabilities. Will you still have a mortgage in retirement? Will you have other debt or support others?
- Among the many retirement savings options, consider what specific strategies will be best for your goals and plan. (An advisor or banker can help here.) For example, you might look at Roth IRAs, target-date funds, annuities or catch-up contributions to 401(k) plans.
Talking with a financial advisor or planner can also help you decide whether it makes sense for you to pursue long-term care insurance as part of your retirement financial plan, and prepare you for government-mandated withdrawals from your defined contribution plans, which usually begin in your early 70s.
“The best financial plans model your life out to the age of 95,” Saltos says. “They are multifaceted living documents, changing right along with you as you age.”
Three Things to Do
- Consider visiting a Regions Bank branch and completing a Greenprint Personalized Financial Plan.
- Review our helpful tools and resources for retirement planning.
- Think about how your retirement savings may be impacted by inflation and factor that into your plan.
