This summer, MoneyTips.com conducted an online survey of 510 Americans and invited some of the top social influencers in personal finance to review the data and provide additional commentary to create the e-book.
It’s important to note that of those surveyed, four out of five are fully retired, are between the ages of 60 and 79, and have at least some college education.
I’m sharing some of the key data and recommendations from those who were candid about their spending habits and investment choices, so you too can reach the final destination of your career with success.
Start saving as early in your career as possible.
More than half of successful retirees admitted they did not save any money for retirement in their 20s and 30s. While you may take comfort in the fact that you can still retire comfortably, know that you will have to play catch-up if you follow suit. At least 30% of those surveyed had to save 11% or more of their annual income for retirement well into their 40s, 50s and 60s. Why not get in the game early?
Seize benefits while you work.
More than half worked for large companies or the public sector, likely giving them benefits like company-matching contributions, which allowed them to save proactively. Those who worked for small businesses or non-profits, or those who owned their own company just had to be more disciplined to get the retirement saving process started.
If you fall into the latter category, you should take this advice from Philip Taylor, founder of PTMoney.com: “You should open a traditional or Roth IRA (both of which have solid tax advantages) and contribute the maximum amount each year. Start with small, automatic contributions from each paycheck.”
Regularly assess how much money you’ll need to retire.
More than a third of retirees never determined how much they needed to save for retirement. Founder of StackingBenjamins.com, Joe Saul-Sehy, likens retirement to a destination, saying, “Would you go on a trip without knowing how to get there?” Over the course of your career, you should evaluate if you’re on track to retire comfortably so you can make changes as necessary.
While you can’t predict your lifespan or interest rates years from now, “Rich Dad Poor Dad” author Robert Kiyosaki suggests thinking of your nest egg as “a pile of cash-flowing assets, rather than cash.” Said Kiyosaki, “You can earn cash flow from real estate rentals, from stocks via dividends, from bonds via interest, or from books or patents via royalties.”
It’s possible to retire comfortably on a modest nest egg.
Forty-four percent feel comfortable with less than $500,000 in assets, with 67% percent living on less than $100,000 per year and 27% living on less than $50,000. Thirteen percent said that at least a quarter of their retirement fund came from a financial windfall (inheritance, lottery, etc.).
Spend wisely on things that matter, and budget like you’re living a retired life NOW.
Sixty-two percent of retirees said they lived within their means and stuck to a budget so they would not notice a dramatic shift in lifestyle once on a fixed or smaller income. Financial writer and blogger Donna Freedman’s personal mantra is “I save where I can so I can spend where I want.” According to Freedman, “This means looking at potential purchases in terms of their real benefits to your life.”
Withdraw funds at a safe rate, or risk outliving your money.
Ten percent of surveyed retirees said they withdraw 5% or more of their nest egg each year. According to Yakezie.com founder, Sam Dogen, “The ideal withdrawal rate in retirement touches no principal.” If retirees are withdrawing 5%, they’re likely breaking that rule in this economic environment. Certified Financial Planner (CFP) Rick Kahler says a safe range would be 2.5%–3%. CFP Cathy Curtis recommends a flexible approach on an annual basis so you can determine “your risk tolerance, your guaranteed income sources, your age, and any changes in wealth and health.”
Money matters may stress you out, but stay focused on your end goal.
Nearly half of respondents said that money is a stress-inducing issue, with the fear of expensive health care costs and outliving their savings topping the list of concerns. Some retirees said they were worried about being able to fund education for loved ones, leave behind a nice sum of money for family or contribute to their favorite charities. However, some of the financial influencers consider those desires as “a nice to have, not a need to have.” In short, worry about YOUR retirement first.
Seek professional advice to take some weight off your shoulders.
The majority of those surveyed saved for retirement by using a 401(k), an IRA or both. Stocks and real estate were two of the most popular assets, but some cited them as their biggest financial misstep. A successful retirement is different for everyone, and choosing the right combinations can seem overwhelming. Sixty-two percent of respondents said they consulted a financial adviser to handle investments and other portfolio decisions.
Perhaps you’re already doing some of these things. You may have already found some successes and regrets. But if you haven’t, it’s important to remember there is no one-size-fits-all answer to what your retirement nest egg should look like. As seen in this study, your choices won’t always be the right ones, but perseverance and diligence can go a long way in being able to retire with confidence.
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