I just read somewhere the average age of a financial planning client is 65. That DOES NOT track for our practice here at Creative Money – my theory is that the younger generations want something other than an asset manager or the more traditional financial services experience. We deal with retirees, but our practice’s bell curve of clients is 35-55.
Retirement Savings Trends
Here are four trends that I see consistently as I work with individuals on retirement planning:
No confidence in Social Security. Did you know that the benefits most 30-40-year-olds see on their Social Security statements are about 18% less than what the baby boomers are getting? Most of my clients don’t want to factor Social Security into their retirement savings. Still, a reduction in benefits is more likely.
Conservative growth. People are FINALLY gaining confidence in the stock market again. Still, when I do retirement savings analyses, I typically plan for a rate of return around 7%–and most people are comfortable with that (if they get more over the next 25-30 years, so much the better).
The onus is on the individual to fund retirement. With Social Security benefits reduced, pensions going away, and even employer 401k matching becoming less common, individuals should take on more and more of the complete responsibility for their retirement savings.
The New Retirement
The key to feeling confident about your retirement savings is to quit comparing yourself to everyone else. Here are three significant steps:
Realize you don’t need a baby boomer retirement. Baby Boomers worked hard and deferred all relaxation and enjoyment until they stopped working. We don’t think this way anymore. Most of my clients are okay working five years longer if they get to have fun along the way, with travel and a more balanced life.
Don’t focus on what you don’t have; focus on what’s possible. 20-30 years in the future is an extended timeframe, so there is no point in freaking out if you haven’t started retirement savings yet. Get the clarity you need to know what to do to get started, and don’t beat yourself up too much.
Future planning makes today more relevant. When people gain clarity on what they need to do to be on track for their personal retirement savings, it tends to motivate them to cut back in the present and start to examine how they spend their money more closely.
Current Economic Trends
The economy has been changing how my clients view their financial picture. They are:
Making employers part of the retirement savings equation. People used to look at the proffered salary and the quality of work to compare one job offer with another. Now, choosing to work for an employer offering 401k matches and other benefits has become a way to make a job offer more attractive to sought-after employees to get an edge in their retirement savings.
Backing away from more expensive homes. Seattle’s real estate growth rates are above the national average. Yet, I notice clients preparing to buy are conservative in deciding purchase prices and how much mortgage debt they want to take on to keep cash flow available for savings.
Engaging in less flashy lifestyles. When I first moved to Seattle before the economic downturn, everyone seemed to be involved in the foodie culture and expensive hobbies. Now, I notice that more and more of my clients are buying cheaper cars and fewer expensive dinners. It appears that people are prioritizing experiences like travel over “stuff” when they spend.
How To Save For Retirement
Many life and family priorities are more immediate than retirement savings. Here are some tips on how to save for retirement even with having children, moving into your first (or larger) home, and paying off student loans:
Build the saving habit. I always say wealth is dictated by paying attention to savings, not the stock market. Focus on what you CAN do instead of what you can’t. Saving something—even as little as $50 monthly—is better than nothing. Make it automatic and increase the amount as you are able.
Always get the free money. If your employer does provide matching funds, save into your 401k so you get 100% of the allowable match. If your employer offers company stock at a reduced price (usually through the employer stock purchase plan or ESPP), take advantage of it.
Funding one IRA annually probably won’t get you there. Suppose you don’t have an employer plan available for retirement savings. In that case, you can use an IRA or Roth IRA, but the maximum contribution for 2024 is $7,000 for people under 50. You’ll probably need to save more than $15,000 to $20,000 annually.
Consider a side hustle to boost your savings. Many clients supplement their income through a side hustle: selling photos or crafts on Etsy, working as a virtual assistant, walking dogs, and designing websites. You never know when your passion or hobby could become financially lucrative!
Saving for retirement doesn’t need to be scary or intimidating. The key is to do what you can and be creative in finding ways to save a few more dollars as you go. The most crucial step is to begin.
Actions This Week
Resolve To Do Something. You might increase your current savings by $50 or simply open a new account. Find one small step that will help you focus on retirement savings.
Stay Positive. I encounter a lot of anxiety when people start thinking—and worrying—about the future. You control the future by taking action. You may need to adapt as you go, but isn’t that true of everything you decide is worth doing?
Get Clarity. Some people start simply by saving, while others need a road map to get motivated. Decide what information you need to take action, and then get it.
If you need some support with this, you might want to start by aligning your priorities with your money through my Chief Initiative workbook – you can download your free copy here.
