It seems like everyone is constantly searching for the secret to wealth. From the explorers setting their sights on the new world hundreds of years ago to today’s day traders, financial success is a goal common to mankind.
What would you say if I told you I had discovered the secret to successful retirement savings? Research has found that there is one simple thing that can greatly improve your chances of retiring wealthy.
It isn’t timing the market. It isn’t beginning to invest before age 25. It isn’t pretending you are Warren Buffet. It isn’t gold. It isn’t marrying a rich widow. What is it?
The Secret To A Successful Retirement And Peace Of Mind
Simply, have a written retirement plan. That’s right, just have a plan and put it in writing. Just having a plan in your head is not enough. It must be written down.
Schwab recently released a study that found that people with a written retirement plan were 60% more likely to increase their 401(k) contributions. They were also twice as likely to stick to a monthly savings goal as those without a written plan. (1)
While you would think that having a written retirement plan would only pay off in the future when you retire, the present payoff comes as peace of mind. Schwab found that 49% of people with a written plan were very confident that they would achieve their financial goals, while only 13% of those without a written plan expressed the same level of confidence. A Wells Fargo/Gallup survey found that even among investors with similar assets, those with a written plan experience a higher level of confidence. (2)
3 Keys To An Effective Retirement Plan
A written retirement plan serves as a guide for investors, and having it all down on paper makes it less intimidating. With a plan, you can break things down into bite-sized pieces that are easier to accomplish and build momentum, which leads to continued success.
There are three key pieces that a retirement plan needs in order to be effective. They are:
Target Savings Rate
The key to any retirement plan is to actually save money. Your account types, investments, rates of returns, none of that matters if you aren’t actually saving.
Your target savings rate will depend upon factors like your income, lifestyle, age at which you want to retire, and how much you already have saved. You will need to sit down with a financial professional for an exact calculation for your specific situation, but a general rule of thumb is to save 15% of your income annually. If that seems out of reach for you, you can start where you are currently comfortable and increase your savings incrementally until you’ve reached your goal.
Long-Term Investing Strategy
Having a long-term investing strategy sounds complicated, but it doesn’t have to be. It’s simply a plan for how you want your money invested based on your goals, risk tolerance, and time horizon. How much do you want in stocks and how much in bonds? Another term for this is asset allocation.
There is no strategy that is perfect for everyone. Your ideal investment strategy and asset allocation depend on your specific circumstances and personality. An experienced financial professional can help you recognize how much risk you are comfortable with and show you what kind of investments will align with that.
Regular Plan Monitoring
A retirement plan is useless if you simply write it and leave it in a corner to gather dust. You need to write it, set it in motion, and then check on it regularly. An annual review should be sufficient for you to see if you are meeting your goals and your planning is working properly or if you need to make changes.
Regular monitoring can show you if you need to adjust your savings rate or asset allocation or rebalance your portfolio. It’s this regular check-up where you will see your progress that gives you peace of mind regarding your financial future. With a written plan that you monitor, you can stay on top of things and have the confidence that you will get where you want to go, when you want to be there.
How I Can Help
Of those that Schwab interviewed, over two-thirds of those with a written plan developed it with the help of a financial professional. An experienced financial advisor can make sure you plan for all potential contingencies and guide you through the planning process in a thorough and methodical manner.
If you have any questions about retirement planning or need help developing a written plan, give me a call at (717) 283-4186 or email me at email@example.com to schedule a complimentary “Get Acquainted” meeting. We can sit down together to see if our firm is a good fit for you and your retirement planning needs and answer any questions you may have.
David Niggel, CFP®, ChFC®, AIF® is the founder and president of Key Wealth Partners, LLC, an independent wealth management firm serving individuals, families, and business owners. Along with over a decade of financial services experience, he has advanced knowledge and training in providing holistic financial planning with fiduciary and ethical care, holding the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Accredited Investment Fiduciary® certifications. With hands-on entrepreneurial experience, he has the unique ability to help clients meet both their individual and business goals. Based in Lancaster, he serves clients through the York, Harrisburg, Hershey, and Central, Pennsylvania areas. Learn more by visiting www.keywealthpartners.com or connecting with David on LinkedIn.