Retiring Soon? Here Are 3 Strategies To Accelerate Your Savings Before You Retire.4
If you’re within 5 years of retirement, this post is for you.
So you’re approaching retirement in five years. You’ve diligently been saving your whole life. You want to accelerate your savings before you retire but where do you start seriously looking at transitioning into enjoying your financial freedom and not working any longer?
To get the most out of your retirement, it’s important to consider what are the things you need to be paying attention to? And what can you do between now and retiring to optimize your circumstances?
Many of the clients we help were committed throughout the years to doing the right thing. In other words, they were fairly frugal and cognizant of having an obligation to save up their nest egg to fund their future.
But like so many pre-retirees, once you reach your final years in the workforce, you find yourself in a place where the reality of knowing the issues that are approaching and the areas of focus and what needs to be done is going to shift and change.
Half the battle when preparing for your retirement is figuring out what your desired retirement lifestyle looks like to you.
Sure, you have been committed to saving for your future and made progress toward your savings goal. But does that goal actually match the lifestyle you envisioned once you retire?
To help you build a solid foundation for your retirement years, here are 3 strategies to help you accelerate your savings before you retire
Strategy 1: Have A Financial Plan Developed
The financial plan will address all of the matters that have to do with your financial security and your progress toward financial freedom, and optimize matters in a way that helps balance all the different priorities that you have. The plan will offer recommended action steps you can take today to help achieve the best balance to align with your goals.
As financial advisors, we ask our clients to walk us through what they envision for their retirement and how they plan to live their life in the years to come. We also review a lot of information such as tax returns, investment statements, insurance policies, and company benefits.
Going through this process together we learn a lot about you. By stepping inside your shoes we understand what you want to happen, what your circumstances are, and identify all of the opportunities that we see to make changes that are going to benefit you now and in the years to come.
The primary outcome is an assessment of how you’re doing. So you’ve been saving all your life but…
- Have your savings efforts finally put you close to financial freedom?
- Now that you have substantial assets, are you employing a disciplined investment strategy to help ensure that your assets are productive enough to achieve your goals?
- What other factors are going to go into providing your income and your financial security as you transition into retirement?
Doing a deep dive at what goes on in your current life when your money comes into your household is important because it provides you with an understanding of:
- Where does your money all go today?
- What does it cost you to live the lifestyle that you’re living? And within that, how much of that falls into the area of saving for retirement and saving for other things, and in routine investing etc.?
- How much of it is taxation?
- How much is risk management?
- How much is debt service?
- How much is everything else, (housing, health care costs, hobbies, traveling, helping family members, etc., which we’ll just call your lifestyle costs)?
Download the Retirement Checklist and Guide
Strategy 2: Optimize Where Your Money Goes
After closely looking into when your money comes into your household you can then optimize your progress toward supporting your retirement income. For example, we encourage you to consider the following:
- If there are opportunities to reduce your taxation
- If there are opportunities for you to save on premiums that you pay for risk management
- If there are opportunities for you to get more money into tax advantaged savings faster
Oftentimes there are opportunities for you to change the way in which you service your debtthat optimizes your other opportunities. To do this you must ask yourself:
- What are you doing now and how is that mix between all those factors working to support where you want to get to?
- What should you change?
A few typical money saving moves we recommend changing could be:
- Making tweaks to the way in which you service debt.
Maybe you’re really, really aggressively paying down your mortgage but that may not be the course of action that benefits you the most relative to other opportunities. - Reviewing and updating insurance policies.
You may have old insurance policies or the wrong insurance policies that take up more money than it is worth to protect you against the risks you need to protect against. - Minimizing your taxes.
Most likely, you’re paying more taxes than you need to. And chances are you’re not saving and taking full advantage of every tax advantaged opportunity you can to save.
With our clients we create a column with a detailed line by line of what goes on in their family cash flow today, and then propose changes that result in more forward momentum in terms of building up a more secure future as you approach retirement.
That’s the first advantage that gives you that momentum boost for the remaining years that you’re working.
Strategy 3: Evaluate Your Current Income & Cost Structure
The second advantage is, evaluating your current income and cost structure. This provides detailed information about the cost structure of your life as it exists today so you can fast forward to when those big income sources are no longer there (i.e. your salary), and understand what’s going to happen when your new sources of income flow in (i.e. your pension or Social Security or both).
It’s important to be realistic about how your cost structure changes and what should be taken into account.
For example, are you still going to have a mortgage? Your taxes are most likely going to go down but you’re not going to save for retirement anymore because now you’re income-free. What about healthcare costs and travel?
By performing a cash flow analysis we can provide you with the number that tells you what it costs for you to continue to live and sustain your lifestyle. To understand what you are looking at in terms of retirement…what your retirement will really cost.
Once this is understood, we can then look to the resources available and make other decisions about how to invest and how to elect fixed income sources. This is what we call the “organization and direction” phase of our process.
If you have any questions on how to further accelerate your savings or about your retirement savings plan, feel free to give us a call or email us. We’re always happy to chat!
