Retirement Meditation #33: Am I on track to retire successfully?

Insights | Retirement Meditation #33: Am I on track to retire successfully?
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Author: Paul A. Carl, CHSA, CPFA Vice President, Retirement Plan Consulting, Registered Representative

A father and his young daughter were looking at a stone grave marker. The father asked his daughter what she thought was the most important marking on the stone. Was it the deceased person’s name, the year born, the year of passing, or something else? The daughter stared at the marker and looked back at her father, proclaiming "no clue" through her eyes and shoulder shrug. “It’s the dash between the years,” responded her father. “That’s when life happens, during the dash. Make sure you make the most of your life. Set goals, go after them, adjust as necessary, and never give up.”

Many participant-directed retirement plan recordkeepers offer participants a view of their retirement savings tracking. Often the tracking-of- success-factor is represented as a percentage by dividing current retirement savings market value by the estimated total savings needed at retirement age. Example: A participant has an estimated retirement savings goal at age 65 of $1,000,000, and the participant has a $350,000 current retirement savings balance. The participant’s tracking is 35% of goal. If that participant is age 37, 35% of goal could be solid, giving the participant nearly 30 years to grow retirement savings by an additional $650,000. If that participant is age 55, reaching a retirement savings goal of $1,000,000 might seem lofty.

To really answer the question, “Am I on track to retire successfully?” takes work on the participant’s part. Evaluating and establishing a retirement savings goal is a great way to start. Financial planning tools abound to help participants understand how much may be needed at retirement. Some readily available tools are simple. Other tools dig much deeper and may require the help of a trusted financial advisor to more fully unfold the participant’s earnings, savings and spending habits, and effectively establish future savings and spending guidelines. 

The output is only as good as the input. If a participant includes all net worth and spending habits, the output is more likely to be more accurate. In the above example, if the 55-year-old participant has investments outside of the retirement plan of $500,000, then the likelihood of that participant reaching a $1,000,000 savings goal increases greatly. Conversely, if the 37-year-old participant has incredible amounts of student loan debt compounded by an excessive mortgage, six-figure credit card debt, and no outside savings, the $1,000,000 retirement savings goal may become harder to reach.

Regardless of where a participant stands currently, it’s never too late to start planning. Participants who want the best success probability to reach retirement savings goals should consider setting an appropriate financial goal, working aggressively to achieve that goal, adjusting as appropriate to ever-changing conditions, and never giving up.”

How are you using data to reach your retirement savings goal?

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