Millions of baby boomers are like me – still in the accumulation phase of retirement planning. Being in the accumulation phase doesn’t necessarily mean you are actually “accumulating.” That requires being a “saver.” A saver has opportunities to save and sufficient discipline to exploit those opportunities. So what separates the successful savers from the not-so-successful retirement savers?
Secret No. 1: Believing that effective retirement saving is doable and that retirement success is not dictated by income level.
I agree with this sentiment 100%. You must believe that regardless of income level, there will be opportunities for you to put something aside for retirement. When faced with the realities of retirement planning, too many folks immediately throw their hands up in frustration, proclaiming that actual retirement is an unreachable financial dream. Millions of middle class Americans have proven this wrong.
Secret No. 2: Feeling empowered and responsible for your retirement saving process.
I believe this means that you have to “own” your retirement future and not depend on someone or something else to plan for you. I am very proud of my youngest son, age 24. He does not make a lot of money but he is contributing 5% of his income to his employer’s 401(k) plan. If he keeps that up over the next 40 years, he will be fine, even if he never becomes a high income earner.
Secret No. 3: Seeing progress toward your savings goal and envisioning your retirement future.
Have you heard the saying that “you cannot manage what you don’t measure”? I am a believer in this, which is why I diligently and frequently monitor my net worth. A positive trend in net worth gives you positive feedback on the success of your retirement saving. I also have a financial vision for my retirement future, in the form of a spreadsheet containing my anticipated retirement income and spending budget. That “vision” is updated as conditions change in my financial life.
Secret No. 4: Obtaining financial guidance from objective sources.
I probably interpret and apply this “secret” differently from many people. I do not use a financial planner. That is my job and I am heavily invested in it. I read and study a lot. I know my risk tolerance. I am a committed DIY retirement planner. However, I do obtain “objective” feedback on my retirement investing and planning using various automated tools that are available to me (and to you). These tell me whether my plan is likely to succeed or fail. There are new retirement planning tools popping up regularly and I look at most of them. I’m going to be writing soon about some of them. By the way, I don’t consider folks who sell investment or retirement income products – despite their good intentions – to be objective sources of financial guidance.
Secret No. 5: Having confidence in your retirement income.
This means that if you believe that your saving will lead to an adequate retirement income that you won’t outlive, you are more likely to stay committed to your saving plan. This means testing your plan using some of the same tools I referred to above. It starts with properly assessing your income needs and longevity. Sadly, the evidence suggests that way too many baby boomers are delusional about all aspects of their retirement security.
Secret No. 6: Making retirement saving a priority.
The very first dollars we save every month should be directed to retirement savings. If you have a 401(k) plan with automatic payroll deductions, that’s a great start. Based on what I read about many baby boomers, retirement saving has been a “when funds are available” low priority goal. This is probably because of a need for instant gratification, bringing us to ….
Secret No. 7: Not being controlled by a need for instant gratification.
This is a problem for all of us, including me. Buying stuff gives us a temporary rush, doesn’t it? Then we look for the next purchase, and so on. I try every day to remember what I preached to my sons over the years: The pain of discipline is far less than the pain of regret.