Balance is about finding the right place to draw the line for you, not anyone else. It doesn’t mean figuring out how little you can live on today so you can save more for tomorrow—it’s about understanding how to live your life today, while also planning for tomorrow. Here are some factors:
- Expected Inflation Rates: As you consider how much money you will need in retirement, be sure to account for inflation rates, which are estimates of how much more things will cost over time. As costs rise, your purchasing power declines, so you will need more in the future to keep up with current expenditures. Think about how much goods and services cost 25 years ago. Now think about then 25 years from now.
- Planning For Market Volatility: Unfortunately, no one can predict what the financial markets might do in the coming years or during the critical years of your retirement. It is important to understand which retirement sources are more reliable than others are and to develop a portfolio using comprehensive, proactive asset allocation.
- Longevity: Due to advancements in health care, nutrition, diet, and exercise, people are living longer and better today than in previous generations. No one wants to run out of money, so planning for longer can help calm the nerves. Many people could spend 30 or more years in retirement, so it is important to factor in family history to project fully your income needs.
- Comfort Level: Some people are more comfortable with leverage and holding debt to have experiences and live lavishly. Others would rather build more equity in the present, putting off their enjoyment until the golden years. Wherever you sit on the saving/spending spectrum, discuss your wants and needs with the important people in your life, including your advisors, so that all parties are on the same page.
Did you know? When it comes to planning for retirement, it may be easy to feel like you’re further behind than you would like to be. The good news is that there is no better time to take control of your future than today. It’s never too late to start saving, investing, and planning.