7 Key Signs You’re Thwarting Your Retirement Plans And How To Stop
Written by
Jordan Rosenfeld
Edited by
Amen Oyiboke
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If retirement is something you keep putting off to think about “someday,” hoping that your savings will just somehow be enough, it’s time to get serious.
By not taking an active stance on your own retirement, you could actually be thwarting it, either directly or by missing out on important savings steps that can comfortably set you up.
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Kyle Menke, CFP, founder of Menke Financial, a Northwestern Mutual firm, explains seven key signs that you’re actively thwarting your retirement plans, and how to stop.
Not Starting Financial Planning Early
One of the most common issues Menke sees in his clients is that people are not starting early enough with a financial planner to even consider retirement planning.
“So oftentimes they treat their finances like something they can do in their spare time, and they’ll get to it later almost thinking they have too much time ahead of them,” he said.
With retirement, time is really “the major factor of success with compound interest,” he explained, thus starting soon is important. However, because people’s needs and plans are so different, your plan has to be individualized as well.
“So not having a strategy that’s dedicated to your personal plan and not starting early is probably the number one key to people that certainly thwarts their success,” Menke said.
Not Utilizing Employer Sponsored Retirement Plans
A second common sign that you’re thwarting your retirement is if you’re not taking advantage of your employer sponsored retirement or health savings plans, Menke said.
“A lot of employers offer matching contributions, and if we’re not taking advantage of at least free money being offered by our employers, there’s certainly a huge, huge gap there,” Menke said.
Not only are those accounts taxed advantaged, but he pointed out that oftentimes there’s bonus money from your employer coming in, as well.
You’re Not Saving in a Tax Diverse Way
Another sign of thwarting retirement is when you’re not considering your tax classifications and lack tax diversification in your planning strategy, Menke said.
“Being offered a 401(k) through your employer is fantastic, but having all of your money in one tax classification presents long-term risks to taxes. So a tax strategy is very, very important.”
Fear of Change
The fourth key sign that you’re thwarting your retirement planning is when you have “a fear of change in commitment,” Menke said.
He explained, “Simply making a commitment to start saving money is a big decision, and you wouldn’t believe how many times we see clients simply resisting making a decision.”
He understands that it can be hard to commit to what feels like a long-term strategy, especially when you’re putting away a significant amount of money that you’re not supposed to touch until you’re retired. But doing so is absolutely necessary.
He helps his clients through this incrementally, and by explaining that sometimes it’s just a matter of saving “differently” instead of saving “more.”
Not Paying Yourself First
Paying yourself first is a way of training yourself to save money with a mindset adjustment. Menke explained, “If savings is second and not first, it oftentimes feels like you’re having to sacrifice something really important in order to prioritize savings.
“Putting savings first, and making sure that’s included as an expense, allows you to build your lifestyle around saving first until it becomes second nature,” he said.
“And oftentimes that’s one that really gets set in stone early. You make a commitment based off of a pay raise or something that you received, and you’ve set the ball in motion sometimes for quite a long while. I mean a mortgage or a car payment have long tails to them.”
Forgetting the Power of Time
Menke said he finds that people tend to misinterpret the impact of time and savings. “They think, oh, if I get to the other side of this expense, I’d be able to save more money, so why don’t I focus on that first? But retirement savings has a tripling effect; the longer you save, the more money you save, the longer you save the money that you saved grows in the marketplace.”
Not Getting Your Kids Financial Planning Too
If your kids are teens or young adults, they should come with you to your financial planner, Menke insisted. “We need to start having these conversations early so that they understand the things that they need to do. Because if you can set that stage in a 22-year-old, I mean, the opportunities are endless.”
Always Save Early…With a Professional’s Help
In summary, Menke couldn’t stress enough how important it is to find a way to save as aggressively and as early as you can.
“Working with a professional and developing a plan around your goals and objectives, that’s got to be the most important piece for overcoming these obstacles,” he said.
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