Are You Really Saving All That You Can?

One of the things financial advisors always tell their clients is, “Save all that you can for retirement!”. But what does that really mean? Does that mean you save whatever is left over at the end of the month, after you have spent money on everything your heart desired? Or does it mean you should live on a miserly diet of oatmeal and water, hoarding every penny until the day you die?

Obviously, the answer lies somewhere in the middle of those two extremes. But what we often find is that clients are confused about how much they really can save. Some are overlooking valuable opportunities for growth, and making just a few small adjustments could mean a much more predictable retirement.

Look at your most recent pay stub. Chances are, you signed up for automatic deposits to your retirement account years ago, and you haven’t made any changes since then. If you’ve received a few raises in the meantime, you should also increase the amount that you’re contributing to your retirement account. At the very least, make sure you are taking advantage of all matching funds offered by your company. Otherwise, you might be saying “no” to free money!

Set up an emergency fund. If you don’t have some cash stashed in an emergency fund, then you’re taking a very big risk with your future. At some point, you will face a financial shortfall, and you might be tempted to rack up high credit card debt or borrow from your retirement fund. Both of these paths can lead to years of regret, and a less stable retirement.

Plan ahead for college tuition. Generally speaking, it is best to fund your own retirement before saving for your children’s college expenses. This is because your kids will have many options to pay for college, while you have to completely depend upon yourself to fund retirement. Having said that, if you are already contributing the maximum allowable amount to your retirement fund, you should start planning for college tuition. A 529 fund allows you to reap important tax benefits while saving for college. More importantly, you won’t feel tempted to borrow from your retirement fund when Junior gets into Harvard.

For information on saving for retirement, call our office to schedule an appointment. Together we can review your financial capabilities, establish a plan for the future, and put you on the road to a stable retirement.
15039 – 2015/11/16