Where Are You on the Road to Retirement?


It is no surprise that a lot of Americans are not properly prepared for retirement, and that many are not even aware of it. For financial advisors, it is not uncommon to meet and speak with people that have not saved enough money to support a desired retirement lifestyle. These folks find themselves seeking guidance regarding how to make the best of a difficult situation. Unfortunately, the real tough love discussions are with those that have saved some money, which they feel strongly should be enough, only to learn that it is not.

On the other hand, we also meet with those that have done a good job of saving, but as they approach retirement (starting in the mid-50s), they aren’t really sure what to do, who to trust, and how to go about obtaining the right advice for themselves. Often the pressure of doing the right thing with their savings and retirement nest egg can become overwhelming.

They may be thinking that if they have done a good job of saving and investing along the way, why bother getting (and paying for) advice at this point? Do they really need someone to tell them what to do? What many don’t consider is that they have moved into a different phase of their investment life. They are beginning to move from accumulation of wealth to distribution of retirement income.

In a number of our different financial education programs, we talk about the significant change in the landscape of retirement, which has occurred between the Baby Boomers and the previous “Greatest Generation.” One of the characteristics of our parents’ generation is that they often relied on Social Security and pensions that provided regular, guaranteed monthly payments. It wasn’t uncommon for them to use savings purely for vacations, big purchases (cars, roof, etc.), and major events (weddings, anniversaries, etc.). This is probably the biggest difference when compared to today’s reality that most Americans will not be able to continue to support their current lifestyle with only Social Security benefits and pension payments. The majority of retired and retiring Americans will have to use a substantial amount of savings to maintain their desired lifestyle.

Even if you have saved enough, you may have to draw out less than you originally planned. This is even more critical in our current economic environment of low interest rates, which we may have to endure for the next few years. This is one of the many benefits of working with a financial advisor, who can help you figure out what you can afford.

Strategies for Retirement

If you are concerned that you have not saved enough for retirement, one or more of the following strategies may be useful:

  • Consider working longer
  • Save more/spend less – starting now!
  • Maximize Social Security benefits
  • Reduce and eliminate debt
  • Invest more aggressively/moderately

Working longer is a popular piece of advice given to those that have not saved enough. That may or may not be an option. It depends on whether you are physically able to work or wish to continue working into retirement.

Saving more can always be a good strategy, no matter where you are in the process. It is unlikely that someone would state that they saved TOO MUCH! Even those that saved enough don’t really feel like they have done so. A practical way to save more is to spend less. LIVE BELOW YOUR MEANS may be one of the absolute best pieces of financial advice ever given! Not everyone can live that way (or may want to), but, it can be a very effective method to save more for retirement. If you have a 401(k) plan or other retirement savings plan that your employer provides a match to your contributions, you should absolutely be taking advantage of it.

Social Security benefits should be built into your retirement plan, so ask your financial advisor or visit your local Social Security office to learn more about options regarding how and when to take your benefits. This is especially important for couples where specific strategies can make a material difference in your long-term retirement income.

Why Reducing Debt is Crucial

I believe reducing debt is an extremely critical part of any retirement plan. For most Americans, minimizing debt when they retire goes a long way to increasing the probability of success in their retirement years. The more fixed expenses that can be eliminated allow more funds to be allocated to discretionary spending, i.e., fun!

Investing more aggressively or more moderately may seem like talking out of both sides of my mouth. The truth is that, in regard to your investment strategy, it depends. It depends on what assets you have saved, taken into context with your Social Security Benefits and pension income vs. your expenses. Investment strategies also depend much on the risk tolerance of the individual investor, and we all know that each person’s acceptable level of risk is different.

The end goal is to have the money when you need it. No matter how old you are, there are lots of potential pitfalls between now and the end of your life. So, as the saying goes, “Today is the first day of the rest of your life.” Thus, it may be time for you to reassess your retirement plan. The knowledge of where you stand on the road to retirement gives you power. Use it to help achieve your long-term financial goals.


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