Are You Spending Enough Time Planning Your Retirement?
September 8, 2014
Not too long ago, I read an article on CNN Money reporting on a survey from Charles Schwab. The results indicate that most workers spend more time researching vacations and car purchases than they do retirement.
It’s true that researching the investment options for a 401(k) or other employer-sponsored plan can be a daunting task. However, since your retirement is something that is likely to last two or three decades, it makes sense that you should spend more time researching it than you do your next vacation.
According to the survey, though, 39 percent of respondents spent five hours or more researching vacation options. More than half of those surveyed had spent five hours or more researching their car purchases. Only 11 percent of those surveyed indicated that they had spent at least five hours researching their investment options.
Have You Performed a Retirement Needs Assessment?
This information isn’t that surprising when you consider that less than half of Americans have performed a retirement needs assessment, according to the Employee Benefit Research Institute. Since many Americans don’t even know how much they will need during retirement, it’s not a stretch to believe that most Americans probably spend more time researching their vacations than their retirement investments.
However, this is not the best way to go about things if you want a successful retirement. Your first step is to sit down and figure out what it will take for you to have the retirement you want. Think about what you want to do during retirement, whether you are interested in travel, working on a hobby, or some other activity.
You should also estimate how much you will spend during retirement, using your current expenses as a starting point. Think about what it will cost to live your preferred retirement lifestyle, as well as think about how much you might have to pay when it comes to healthcare costs and other living expenses. A good, fee-only financial planner can help you figure out what to expect, and there are a number of online calculators that can also help.
Where Should You Put Your Money?
Once you know how much it will take for you to meet your retirement goals, you can then figure out where to put your money. Most employer-sponsored retirement plans allow you to choose from a number of index funds and ETFs, and other investments. You can look over these investments to figure out which are likely to help you reach your goals.
If you aren’t sure what to expect, you can get guidance from someone in the HR department, or consult with a knowledgeable and trustworthy fee-only financial planner. While it can be daunting, especially for the beginner, there is no reason to avoid it. Start out by learning about your options, and then figuring out what is appropriate for your situation. You might be surprised to discover that, if you give the same amount of thought to your retirement situation as you do to your vacation planning, that you will be in a better place with your long-term finances.
So, are you spending enough time planning your retirement? Leave a comment with your thoughts!
All posts by Miranda