For Successful Retirement Planning, Envision Your Retirement First
Every month, your company may deposit money directly from your paycheck into a 401(k) without you paying much attention to it, except for a quick glance when your W-2 is mailed out each year. This form of may be common, but it’s not the only strategy for building the life you want when you’re finished working.
There’s more you can do to ensure you’re going to have the life you want for the 30-year span many Americans can expect now in retirement. The “more” may surprise you – it’s taking the time to actually plan and thoughtfully consider how you want your retirement to look. While it can be difficult to spend extra time planning for retirement when it’s decades away, your success on the other side of the equation may well be worth every minute.
A new by Capital Group shows that pondering your retirement plans can be part of a good strategy for building your retirement wealth. The company surveyed 1,200 individuals across millennials, Gen Xers and baby boomers to learn about how they fare in setting aside money when they have a vision for retirement.
The survey presented 15 questions to half of the participants asking them to provide some information about the lifestyle they anticipated having in retirement. This included not just the income they wanted to have, but what they planned to do during retirement. They were then asked to determine how much they should set aside based on their plans. The other half of the participants were instructed to determine how much to set aside first, then discuss their plans for retirement.
The results demonstrated an interesting trend. Those who planned out their vision for retirement first determined that they should set aside an average of 21.2% of each paycheck, compared with 16.2% for those that set aside money first, then dreamed of retirement.
In other words, setting goals for retirement in terms of not just your income, but the lifestyle you plan to pursue, can motivate you to save about 20% more.
It’s important to think about what your daily life will be like, because that’s the side of retirement planning that is most critical. Will you downsize your home, or do you plan to work part-time?
Think about the kinds of hobbies you’ll pursue. Do you want the freedom to enjoy golf multiple times a week, followed by a leisurely lunch in the clubhouse, or are you more likely to join a book club or a gardening club? It’s often the activities that build social connection that are most critical for an enjoyable retirement, so think about what kinds of things you’d like to pursue.
Retirement planning isn’t just about having a certain amount of money saved; it’s about the life that money will support. It’s about serious freedom to have the life you want, both now and in retirement. at Family Investment Center to get started on your freedom journey.