The Goldilocks Paradox: Enough Savings for Retirement
Do you know how much money you should be saving for retirement? As a financial advisor, you probably expect me to have that answer for you. However, the answer is a lot more complicated than you might think.
You should save as much as possible for retirement, but how much you save shouldn’t be the question. What you should really ask is, “How much can I spend in retirement?”
The lifestyle you live — and many other factors — will determine this, but there’s an interesting phenomenon that occurs among new retirees that you should consider. It’s not uncommon for people to live well below their means as they start retirement because they worry that spending money too lavishly will deplete their retirement savings. As time progresses, they discover they have more time for hobbies, travel, and dining out. It’s easy to start living beyond their means, but this could derail a retirement plan and lead to an income gap later.
A good retirement plan straddles that line for you. It includes a budget that has been stress-tested as sustainable for your lifestyle, based on what you want most out of retirement. What are your guaranteed expenses and sources of income? What lifestyle do you want to live? Does one thing, like the ability to see your family, matter to you more than another item, like traveling? (As a note, retirees tend to change their plans for retirement as they ease into it. Don’t resist this! That’s perfectly normal.)
How much money you have accumulated throughout your life and subsequently have saved for retirement doesn’t determine how happy or prepared you are for that next big chapter. There is no amount of retirement savings that is too high or too low; what matters most is that you have a plan that supports your spending habits. It has to be “just right” — as Goldilocks would say.
Proper financial planning can help secure this, and a budget can provide you with parameters for safe spending in retirement. Partnering with an experienced, knowledgeable financial advisor can help you create a financial plan that supports your retirement goals while also providing you with peace of mind when plans change. My goal is to help you find the retirement plan that is built around your goals and “just right” for you.
Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance.
She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help their clients avoid a future tax time-bomb. Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones with less tax burden, planning makes the difference.
Her new book, The Generational Wealth System outlines a holistic approach to preserving lifestyle, wealth and legacy.
