Stop procrastinating on your retirement plan! here’s how
As a financial advisor, I have had the privilege of sitting down with real people and hearing their unique stories for over 15 years. I heard the financial stories of about 4,000 people during this time. My clients come from all walks of life and bring things to me that they might never discuss with anyone else. What is the problem that comes up regularly, at all levels? Procrastination.
How can we get people to recognize the corrosive impact of procrastination? Here are some symptoms and suggested remedies to relieve them and actively fight procrastination.
The professional life arc has provided me with some perspective on the human psyche and how and why people do what they do. To say it was fascinating would be an understatement. Based on my observations, here are some key points I learned. These points are simple, common sense rooted in real life, and from real people.
Procrastination symptom # 1: I’m in no rush
“I have years before I have to make this decision.”
You have time, but often it doesn’t take the form of years. Any decision deserves careful consideration, but decisions can and should be made in days or weeks, not months or years. Choose a reasonable period of time to commit to acting on the choices offered to you. If you feel pressured into making a financial decision, step back and approach it with a different person or from a different perspective.
Procrastination Symptom # 2: Back Priorities
âI will eliminate the debt and prepare for retirement. “
In these times of extraordinarily low interest rates, take on the âgoodâ debt and avoid the âbadâ debt. Debt is like cholesterol – there are good things and bad things. Adopt 30-year mortgages in your 20s, 30s, and 40s, and consider an eight, 12, or 15-year mortgage in your 50s and 60s. Too often, I have seen people proudly released from debt in their early 50s, but woefully behind when it comes to saving for retirement. Your home will be able to provide $ 0 of your retirement income, and starting to save for retirement in your 50s will also mean you miss out on the most crucial element of retirement planning: time.
Procrastination Symptom # 3: One Day Syndrome
âI invest cautiously because I don’t want to lose money. Maybe one day I’ll be more comfortable with adding risk.
If you are uncomfortable with risk in your younger years, get so! If you can’t, you’ll have to save three to four times as much, which is probably impossible. Most of us, at some point, will have to make decisions that require blind faith and trust – as difficult as it may be at times – to accept the risk of getting proportional reward. The patient and well-allocated investor can reasonably expect a 5-6% return over the long term.
Procrastination symptom # 4: spend now, save later
âI love it when I get a raise, a promotion, or write off a debt! My cash flow suddenly improves! “
Whenever you see an improvement in cash flow, sit down with rigor and discipline and answer this question: what should I do with the extra cash each month? If you get a 3% increase, this may be an opportunity to increase your contribution to the pension plan by 1%. You get a new job and a 10% raise; increase your pension contribution by 4%. You take out an auto loan of $ 300 per month; start adding that $ 300 per month to your savings as a down payment for the next vehicle purchase. Improving cash flow without applying this discipline is like a glass of red wine in financial blood. In no time at all, your lifestyle has adjusted to the increased cash flow and it’s harder to make a change.
Symptom of procrastination # 5: rely on mom and dad
âI will inherit the money that will be used in retirement. “
I advise clients to generally reject possible inheritances. If that happens, so much the better. But many tidy nuggets have been wiped out by long-term care spending. An 80-year-old patient admitted to the dementia unit of a specialty care facility could go through a million dollar portfolio in as little as six to ten years.
Procrastination Symptom # 6: Partner Problems
âMy partner is a ‘living for the day’ person and I can’t seem to get him to adhere to long-term planning. “
It’s very common and it’s a difficult dynamic. Get on them and stay on them. Your future may depend on them, and a reluctance to participate in the process reduces your chances in the long run. I like to show resistant or ambivalent people how much they can save over the next 10, 20 or 40 years with even small contributions and moderate risk. For example, if a 25-year-old adds $ 6,000 to a Roth IRA each year for 40 years and earns 7%, he could have almost $ 1.5 million by age 65. This is a serious incentive to take savings more seriously. These “time value” calculators are all over the web.
If nothing works, you have no choice but to take responsibility for it yourself. It can be stressful and lonely, and maybe not possible if the partner is also spending a lot.
In conclusion, the most important asset we all have is time. Every day, this asset is dwindling for us. Morbid? Yes. But a fact. I work with clients in their 50s who have been doing what they were supposed to do from their 20s and who show up to my office with wide eyes at what they’ve built over time. They didn’t have to earn a lot of money. All is relative.
People of All Ranges Can Create Six-Figure Retirement Accounts with Relative Ease if:
- They show rigor and discipline.
- They don’t procrastinate.
- They can accept a reasonable level of risk.
Start by saving a minimum of 5% in retirement accounts and increase this amount with discipline by 1 to 3% each year. If you must retire for life event reasons, do so, but resume this crucial cycle when circumstances permit.
I wish you good luck on this journey.
Financial Advisor, CUNA Brokerage Services
Jamie Letcher is a financial advisor at CUNA Brokerage Services, located at Summit Credit Union in Madison, Wisconsin. Summit Credit Union is a $ 3 billion UC serving 176,000 members. Letcher helps members achieve their financial and financial goals through a process that begins with a âget to knowâ meeting and ends with a collaboration plan, completed with action steps.