By: Ty Totzke, ChFC®, AIF® , Wealth Advisor
As my wife Sarah and I drove the family to Colorado, I was reminded of my childhood. Whenever we took a family vacation, it always involved loading up the big conversion van and driving hours and hours— sometimes days— to reach our destination. We never considered jumping on an airplane to arrive in Arizona (or wherever we were going) in a few hours. What I remember most about those family vacations was the journey across many towns and states. I also remember the road construction we would run into that would change the expected route to get to our destination, or the weather that would increase our expected travel time, or the random speeding ticket that would be a laughable memory after the trip, but not so humorous as it was happening.
The methodology for adjusting to all of the unexpected happenings on a family road trip also applies to our retirement planning. We have to be prepared to make changes along the way. Here are three practical considerations if you are saving and investing for your retirement.
- Define your destination. As with any road trip, you will get to where you are going much faster if you know your destination. We frequently hear the question, “How much money do I need to retire?” The answer to that question is going to be different for everyone, because we all have a different retirement destination.
- Stay focused on your destination. Don’t let a sideshow take you off track and impede your ability to get to your destination. There will be ups and downs in the markets, but don’t allow short term, emotional decisions to distract you from your long term goal.
- Plan for the unexpected. Just as you might plan some extra time for the unexpected stop along the highway, keep an accessible amount in cash to cover any unexpected emergencies.
This same approach also applies to a business owner or fiduciary of a business sponsored retirement plan. Your employees are likely relying on the retirement benefit of your business to reach their own retirement goals. If you have oversight responsibilities in a 401(k) plan or Simple IRA plan, here are three considerations:
- Savings levels and investment allocations are the most important contributors to the retirement success of your employees. So much emphasis is placed on the performance of a particular investment that it is easy to lose sight of how we determine success. The key is to keep saving and moving ahead with appropriate investments. Three of the best methods to keep employees moving ahead are automatic enrollment, auto savings escalation, and investment re-enrollments.
- Understand the process of selecting and monitoring investment options offered within your plan. In the financial industry, there is a lot of attention on fees for the service providers of various types of retirement plans. Think of fees as the average speed for your long drive. On a long road trip, if you are able to increase your average speed, you can significantly reduce your drive time, just as higher fees might slow down your participants’ path to retirement.
- Stay involved and informed of the rapidly changing retirement plan industry. If you are the sponsor of a retirement plan, like it or not, you are the driver and must not fall asleep at the wheel. Let the advisors at Sweet Financial Services help you make sure you are meeting all of the fiduciary expectations that come with offering a retirement benefit to your employees.
Getting to retirement is a long journey. You want to have a general idea of where you are headed and how to get there. With your destination in mind, keep moving forward and avoid major setbacks: making early withdrawals, cashing out your investments, chasing performance, or taking breaks in saving. As always, we are here to help you along your road trip. And we’re also here to help you support the journey of your employees.
Opinions expressed are those of the Ty Totzke and the advisors at Sweet Financial Services, and are not necessarily those of RJFS or Raymond James. All opinions are as of this date and are subject to change without notice. Investing involves risk, investors may incur a profit or a loss regardless of the strategies employed. Prior to making an investment or retirement plan decision, please consult with your financial advisor about your individual situation. You should discuss any tax or legal matters with the appropriate professional.