Build your future with a strategy for today
Creators News Service
If you were building the home of your dreams, you wouldn't run down to the local hardware store and stock up on nails, drywall and wiring, dump it all in a pile and see what you can make.
Yet that's just how many Americans go about saving for their golden years.
"If you are building a home, first you work with an architect to dream up the masterpiece. Then you go out and buy the products to achieve that goal. It shouldn't be any different with your finances," said retirement planning specialist Gary Ott, spokesperson for AXA Advisors, LLC.
Much like designing your dream home, designing your retirement starts with a sound strategy. You need to know what's truly important to you, enlist the help of an "architect" and consider what you can afford today, not 10 or 20 years from now, Ott said.
"You need to develop a strategy first," he explained. "The specific products are the last part of the plan."
Think of the retirement savings and investments as the tools and supplies. They are merely a means to an end -- a way to make the money you need to live the retirement of your dreams.
"The numbers part, the data part, is easy," he said. "The hard part is the emotional side. What do you love? What's the most important thing for you in retirement? Most people get hung up on the numbers and forget about the emotional side."
Maybe you want to travel overseas. Maybe having a new car every few years is more important. Perhaps you'd rather rest easy knowing your home is paid in full. The key is painting a picture of your ideal retirement. Only then can you move forward.
FIND AN ARCHITECT
As with building a dream home, you will require a little outside assistance when planning for your golden years.
Seek financial professionals with training, credentials and certification in retirement planning. Ask friends and family for referrals, and above all else, make sure the chemistry is right. If your planner seems more concerned with selling products than discussing your future goals, priorities and concerns, keep looking.
"You need to feel comfortable with your retirement planner," Ott said. "You're going to be working with this person on a long-term basis, so get to know each other. During the first meeting they should be identifying your priorities and concerns and determining what type of retirement planning would be beneficial to you and your family."
Once you find a match, expect to attend several meetings before you ever part with your hard-earned cash.
During the data-gathering phase, your retirement planner will review your financial inventory and work with you to design your ideal retirement. Expect to provide detailed information on everything from your income and assets to a copy of your current will and life insurance policy.
Be prepared to supply copies of recent pay stubs, tax returns and Social Security statements, as well as information on employer-sponsored 401(k) plans, currently held mutual funds and stocks and any outstanding debts. Your planner will also ask you to complete a detailed expense worksheet to get an accurate picture of how much you earn and where the money goes.
Why so much information? Because what you spend now is a good predictor for future expenses.
WHAT CAN YOU AFFORD NOW?
As with that dream home, what you can afford today will have a big impact on the final outcome. We'd all love to retire with a few million in the bank, but it pays to be realistic.
"You want to be sure that what you start today you can continue tomorrow," Ott explained. "Like a New Year's resolution, many people are too aggressive in the beginning. You need to identify what actually fits your current lifestyle so you don't start and stop saving for retirement year-in and year-out."
Retirement investments offer bigger payoffs when you keep up with them. By adding a little each year, over the course of several decades, you'll come out far richer than someone who takes the on-again, off-again approach to investing. It's the miracle of compound interest at work.
"If you take a look at how much you having coming in and going out, adjust for taxes and inflation then see what you have left over to invest, your retirement strategy will be significantly more accurate," Ott said.