Write it down: Plan for retirement success «
Whether you’re in your 30s, 40s or 50s, it’s time to create a written retirement plan. And if you’re just five or 10 years out from retirement, it’s crucial that you do so.
At its most basic, such a plan entails estimating what your retirement expenses will be, and figuring out where the money will come from to pay those bills.
Creating a plan “can be an eye-opening experience for some people,” said Jeff Gorton, a CPA and certified financial planner, of Gorton Financial Group in Oklahoma City. “It can show people that, ‘Yes, I do have enough money for retirement,’ or, ‘No, I have to make sacrifices now.’ It helps them to make the hard choices.”
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If you don’t have a plan, you’re not alone. Just 29% of middle-income people in a recent survey said they have a written plan.
But having a plan ties in with feeling a lot more confident about the future: 70% of those with a written plan said they are confident in their future retirement, compared with 44% of those who do not have a plan, according to the telephone survey of 1,000 people with household incomes of $50,000 to $100,000, conducted for Wells Fargo by Harris Interactive.
And it’s not simply a case of wealthier people being more likely to have both money and a plan for how to spend it.
“Regardless of income, those with a plan had saved three times more toward their goal than those who didn’t have a plan,” said Laurie Nordquist, head of Wells Fargo Institutional Retirement and Trust.
Age isn’t necessarily a factor, either. Fully 34% of people in their 30s said they had a written plan. Read more about the survey: Youth beats middle age in retirement planning.
Do it yourself
You don’t have to pay a financial planner (though there’s a good argument to be made for going in for a retirement consultation if you’re 10 years or less away from retirement). “People can do this on their own and I would encourage them to,” Gorton said, though he noted that meeting with a planner provides accountability and “helps to make sure it gets done.”
A written plan may help you be a better saver; plus, it can have a big impact on how you feel in retirement. “A lot of people retire and they’re afraid of spending their money, so they hoard it,” Gorton said.
Without a written plan, you’re likely to have “a lot of anxiety about what can happen,” he added. “The written plan helps take away that anxiety. If you don’t have that written plan you can blow through your savings. Or you can spend too little, and have a retirement that’s really below what you deserve and what you worked all your life for.”
Your first go at a plan doesn’t have to be complicated. Eventually, you’ll need to consider how you plan to invest in retirement, and you’ll have to get more detailed on precisely how much income to withdraw from which account, and when.
But, first things first: If you don’t have a written plan, start with the basics of income and expenses. The form that Gorton asks his clients to fill out is just one page, with entries for items such as rent or mortgage, car insurance and maintenance, TV service and gifts.
First record your current expenses. “Try to be very realistic and detailed in looking at your current expenses, down to pet care, yard maintenance, salons or spas, anything like that,” he said. “Americans aren’t good at budgeting, but this is the first portion and it’s a critical portion of the written income plan.”