Some people foolishly think the future will take care of itself. If you own a business, maybe you think your business will provide ample money in your future (maybe it will, maybe it won't). You might contribute to a retirement-savings plan at work and nurse a vague idea of how much to save. That won't cut it.
According to the Employee Benefit Research Institute (EBRI), almost half (49%) of workers remain unsure if they save enough for a comfortable retirement. One in seven retirees also voices little confidence about retirement nest eggs.
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Reasons for this lack of confidence vary but include fuzzy planning. One in five workers believes retirement requires saving 20% to 29% of his or her income and nearly a quarter (23%) think retirement needs 30% or more. Incredibly, just 2% of workers and 4% of retirees say saving or planning for retirement is the most pressing financial issue facing most Americans.
Start with a financial plan. The EBRI survey shows that only 46% of workers formallycalculate retirement savings. Without a target you can't know exactly how much to save. A financial plan won't tell you if you save enough money but it can say if you're headed in the right direction.
Let's say you create a financial plan and then see you only have a 50% chance of retiring with your current lifestyle; you better make some changes. (If it looks like your chances are better than 99%, relax.) Get a target and start moving toward it.
Notably, EBRI reports that fewer than a quarter (23%) of workers and 28% of retirees seek investment advice from a professional financial advisor.
Pay yourself first. This old adage in financial planning hinges on making sure you aut! omatically save money out of your paycheck or invest it straight from your checking account, unseen. If you never see the money, you won't spend it.
Many do spend it. Meeting day-to-day expenses head the list of reasons that workers don't contribute to an employer's plan, according to EBRI. More than half (55%) of workers and 39% of retirees also report a problem with debt – and only half can come up with $2,000 to meet unexpected needs within the next month.
Use your company's retirement plan. If your company matches your contributions to a retirement plan, take full advantage: The match equals free money.
In some retirement plans, you don't even set up an investment account – your employer does it for you as well as sets up a transfer from your paycheck to your investment account. Almost too easy to be true.
Save half of any raise. You can't spend the entire raise. Fight temptation and start increasing your savings with 50% socked away automatically.
Upgrade your skills at work. If you want to make more money, improve how you do what you do (an improvement usually up to you). Then you can demand more money in your paycheck and can really afford to save 50% of extra money.
Be disciplined about saving. Saving for retirement is a marathon. If you save consistently for a long time, you wake up one day near or at retirement and find a big pot of money waiting for you.
You can use that pot as a safety net and decide to continue working or you declare it time to move on to the next chapter. Point is, disciplined saving gives you choices.
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Josh Patrick is a founding principal of Stage 2 Planning Partners in South Burlington, Vt., and a member of the AdviceIQ Financial Advisors Network, which is a USA TODAY content partner offering financial news and commentary. Its content! is produ! ced independently of USA TODAY.
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