“How much should I be saving for retirement?”
We get this question all the time…
In this episode, April will cover the basics of saving for retirement, including:
Savings goals for different stages of life
A helpful rule of thumb
Saving in the right places
How to make saving systematic
And more
This episode marks the first edition of “Ask April,” a new segment in which April will answer the most common financial questions from clients, share practical advice, and help listeners become aligned with their financial goals and dreams.
Whether you’re starting out on your financial journey or looking to fine tune your existing strategies, April is here to help.
Mentioned in this episode:
Transcript
April Schoen: Hello there, everyone, and welcome to another insightful episode of The Secure Retirement podcast. I am one of your hosts, April Schoen and I'm so happy you're here with me today. You know, I've had the incredible privilege of working with clients for over the last 10 plus years, helping them navigate sometimes the tricky parts of money, finance, retirement planning and everything in between. It's been an incredible journey.
And one of the things that I cherish the most is the opportunity to answer some of those pressing questions that our clients have. And that's why we're introducing the Ask April segment. This is where I'm going to take some of the most common and pressing questions that you, our clients, often have about all things financial. So whether that's about building a rock solid retirement plan, making sense of investment options, or even getting into the psychological side of money, I'm gonna break it all down for you.
Think of this segment as our way of having a cozy chat over a cup of coffee, where we dive deep into topics that matter to you, and your questions are going to drive these discussions. My aim is to provide you with practical insights, actionable advice, and a dash of encouragement to help you make informed decisions that align you with your financial goals and dreams. So whether you're just starting out on your financial journey, or you're looking to fine tune your existing strategies, this segment, Ask April, is here for you.
So remember, no question is too big or too small. We're all in this together, navigating this world of finance one question at a time. So before we jump in to today's questions, I would just like to take a few minutes to thank each of you for being part of our community. Your curiosity, your engagement, your thirst for knowledge is really what makes this community so special. And I'm excited to continue this journey of growth and learning with you all. So without further ado, let's jump into today's question as we explore the world of finance together.
So welcome to Ask April. Now, today, the question that I'm going to answer is, how much should I be saving for retirement? Okay, I get this question all the time, from clients, wanting to make sure hey, am I saving enough? Am I saving the right amount of money back on my balance sheet to make sure that I'm all set for one day when I decide I am ready to step off into retirement? So let's talk a little bit about why it's important to focus on this. And then what we're going to do is we're going to talk about how to focus really, how much should you be saving. We're going to talk about saving at different stages of life.
I've got a rule of thumb I'm going to share with you. We'll talk about making sure that you're saving in the right places, how to make it systematic and automatic, and then also how to make some adjustments and have some flexibility along the way. So let's get into this. So I'm sure you already know, but why is saving for retirement so important to your financial security? It doesn't matter what stage of life you're in. It doesn't matter if you're in your 20s and you're just getting started in your career. Or if you're in your 60s and beyond and you're getting closer to retirement.
It's important that we are saving and we're putting money away for tomorrow. Now I'm going to use terms like retirement, but that might not be important to you. You know to you, it might mean that you want to be saving money to buy that dream home or buy that vacation home. It could be that you want to be saving money to pay for your kids' college, right? There's lots of different reasons why we want to be saving money. So feel free to interject any of those into this conversation today.
But I am going to focus on how much should I be saving for retirement? Because that is probably one of the most common questions that I get from clients. Either how much should I be saving? Or am I saving enough? Or did I save enough for those that are getting really close to stepping off into retirement. Now, I'm sure you've all read the articles or heard when people talk about how much to save for retirement. Usually people start talking about life expectancy, right?
So I want you to imagine you've got someone in their 30s and they are saving money, they're putting money back on their balance sheet. And they just continue to do this over time. So they get to their 40s and their 50s. And now, they get to this magical point, sometime in their 60s, and they say, you know what, I'm ready. I'm financially ready to step off into retirement. And we equate this analogy of saving and getting to retirement, we talk about sometimes, the analogy of climbing up and down a mountain.
So when I'm saving money, I'm taking income, I'm saving it somewhere back on my balance sheet somewhere like savings, investments, retirement accounts. And the idea is I'm climbing up this mountain. And the goal is I'm going to get to the top of this mountain one day, and I'm going to be ready to now start stepping off into retirement and go enjoy this life. Enjoy all those things that I haven't maybe had all the time that I wanted to do while I was working. And now I'm gonna start going down the mountain. So now instead of saving money, I'm spending money.
So now I take my net worth. I took income while I was saving money to accrue net worth. Now I'm going to do the opposite, we're going to take net worth, and we're going to turn it into income, and we're gonna start going down the mountain. And one of the reasons we want to focus on this is people are living longer, right? We say average life expectancy is 85. But that's just average.
And for us in our plan, we want to plan on you, our clients, I'm going to knock on wood for you. We plan on our clients living a very, very long time in your retirement. And so you have to plan for that. You can't say, all right, I'm just going to make it to age 85. Because what if you make it a 95? What if you make it to 100? We've got to make sure that you're not going to get to that point and run out of money. So that's why it's important to be saving.
Now, saving at different life stages can look at different things. So let's think about if someone is in their early career, right? It could be someone in their 20s. And they're just getting started. What are some of the things that they should be doing? So one, I tell everyone, the first thing that we want to do is when we're beginning to save is that we want to build up an emergency fund. We want to have savings, we want to have liquid cash that we can get our hands on, if we need it or want it.
And we really think about having that emergency fund, you know, what if fill in the blank, right? What if I need a new car? What if I lose my job? What if I get sick or hurt and can't go to work tomorrow, right? We've got to have liquidity and savings on our balance sheets. And that's extremely important for those who are just getting started thinking in that early kind of career. And if you can build this foundation around that as you progress through your career, you're already going to have a really strong foundation.
Now we recommend as a rule of thumb, and sometimes I laugh about rules of thumb. Because whose thumb are we using? Are we using my thumb? Are we using my business partner, John's thumb? Are you using yours? Like whose thumb are we using? But for the most part, we do have to have some guiding principles, right. So our guideline is for clients to be saving between 15 and 20% of their gross income back on their balance sheet for retirement.
And this, again, could be any version of putting money in savings, investments, and retirement accounts. Now there are also rules of thumb around how much should you have going into savings, investments, and retirement accounts. But I'm gonna save that question for another day. For another segment of Ask April. But one of the first things that we talk about is making sure that clients are saving between 15 and 20. And I really recommend that 20% be your minimum, okay, that that be what we call is your non-negotiable.
That no matter what, that's how much you're saving, that's how much you're putting back on your balance sheet. So let me talk about this for a few minutes, because you may hear that, and you may be thinking, well, April, I am nowhere near saving that. So if I'm not anywhere near it, do I just give up? Do I just not even focus on it? Do I just put my head in the sand and pretend I didn't hear that it doesn't exist? Because I'm nowhere near that.
And what I would tell you is absolutely not. This is what we call as optimal. The end goal is to get to that point. But we have to start where you are. So that might mean especially for someone in their early career or their mid career. It might be that we set the goal of you know what this year, let's get to 10%. Can we get to 10% savings? And then from there as incomes increase as we pay down debt as we maybe look at our spending plans, right. As we're able to restructure things and was able to, let's start saving more back on your balance sheet.
Now maybe we get to 12. And then we get to 15. And you know what, then we just start increasing it 1% per year till we get to that 20% number. So don't get too hung up on, it's a big number. I can't ever get there. What we just need is a plan on how to get you there. Where do we start now? And we just start making small changes along the way. And it might take years, but trust me, you will actually get there. You will get there. And does that mean that things don't come up and life doesn't happen? And that, you know, every year you're, you know, something comes up and you're not able to do that? Of course not.
You know, I think back to a few years ago in 2021, when my family, we moved from Jacksonville back to Tallahassee. Okay, did I save 20% that year? No, I did not because we had so many out of pocket expenses with the move. Okay, but that was just one year, but we have a focus on savings. And we make sure we keep our eye on that. Now, as someone is getting closer to retirement, sometimes this is when people can save the most amount of money. You think about that for a second. It might be that kids are out of the house and out of college, it could be that mortgages are paid off, or debts are paid off.
A lot of times this is when people are making the most amount of money that they have, right. Their income is the highest that it's been over their career. So sometimes it's really in that nearing retirement stage when you are able to save the most amount. And this is when it's really important that you pay attention to where you're saving at, so that you can take advantage of some tax planning strategies. Especially as you're getting closer to retirement and having an eye on not just how much have I saved, but it's also about where am I saving at so that I have got some balances from a tax standpoint.
There are lots of different vehicles that you can save money into. Again, I'm going to save talking through the different types of accounts for another episode of the podcast. But just know that that is something that we want to focus on, we want to make sure that we're saving in the right place, that sometimes it's actually not so much about how much are we saving, but it's more important about where are we saving at on our balance sheet. And thinking about having a good balance between savings, investments and retirement accounts.
Let me give you an example. Sometimes I meet with clients who are closer to retirement, and all of their money is in some type of retirement account or plan. It;s some sort of 401k through work or, you know, maybe they have like a 403b or a 457. But they have all of their money in a pre tax retirement account. And then that may not be a bad thing. But what it does do is it limits our choices and options. Because when we get to retirement now that's the only place we have to go get income from. And that means that every dollar that comes out of those plans, is taxed at our highest marginal rate.
So we just want to make sure we have an eye on that and that we're paying attention to it along the way. One of the things I talk about with clients is how important it is to make saving systematic and automatic. Sometimes we ask this question or answer this question. You know how do good savers save? Well, good savers save, because they make it systematic, because they make it automatic. They get it out of the checking account. Sometimes I joke about getting it out of harm's way, and they're being intentional about it.
And actually, that's, you know, I mentioned that a client may have all of their money in retirement accounts. The reason that we see that a lot is because someone starts in their job, their career, they start putting money away into a 401k or putting it into some sort of employer sponsored retirement plan. Comes right out of the paycheck, goes right into their retirement account. They never have to think about it. It just happens automatically every single time. Every single month, they're adding money and their employer is adding money. And so that's really how they end up having a good nest egg and those retirement accounts.
Okay, so one thing we want to do is, you know, again, how much should we be saving? Where should we be saving at? We want to make sure that it's systematic and automatic. That's really going to help you stay disciplined. And I also recommend that we get it out of harm's way. It's actually helpful if you create a barrier, right? And what I mean by that is that you have another account, not tied to your checking and savings where the money's going to, so that you create some separation between your regular checking and savings, and some of these other accounts where you're building more for the long term.
Now, it is very important that we have some flexibility around our plans. And I recommend that clients really do review their overall savings plan at least once a year. Because here's the thing, life changes, situations change. You know, it might be that you have more income coming in now. It might be that you paid down some debt, it might be that you've restructured some things in your financial world. And so we can't just stay stagnant in whatever plan we set up years ago, because life changes.
So I really recommend, sometimes even with clients, I'll say, you know what, why don't we, it's been a few years since we set up your plan, maybe two or three, why don't we just start from scratch? Why don't we pretend that you're walking in for the first time today? And what would be some of those recommendations that we would make to you? Because a lot of times, I do find that clients are in a different position several years down the road from when we started working together.
So it's important that we review those savings plans and those goals and kind of see where we are. Are we on track? Are we not on track? Are there some detours along the way? Making sure that we're adjusting to kind of where we are today financially. And again, what I would really focus on is having a plan for where you are today. Again optimal goal would be saving 15 to 20% of your gross income back onto your balance sheet.
But you have some other things to take into consideration. What if you have a pension plan? If you work for a state or federal government, then you most likely have a pension plan. How does that factor into how much you should be saving? So it's not really a one size fits all, or not just a rule of thumb, you do have to look at everyone's situation, specifically, because they're all different. Those are definitely some things you want to kind of keep in mind..
But just as a general rule of thumb, if you aim for saving between 15 and 20% of your gross income, that's a really good guideline for you. And then you really want to make it systematic and automatic. So you want to make it as easy as possible so that it's just happening on autopilot, and you don't have to think about it too much. And then you really want to focus too on where is the best place for you to be saving. Again, thinking about savings, investments, retirement accounts, what's the mixture there that's going to help you the most? Maybe not even just now but also as you get closer to retirement.
Well, guys, I hope that today's episode, I hope that was helpful for you to give you some ideas about how much to save and kind of having some balance there between where you're saving out on your balance sheet. And if there are some questions that come up for you, if you as we're going through this and you hear an episode and there's a question you have or something comes up, feel free shoot me an email at April_Schoen that's s c h o e n @yoursws.com.
You know, put in the subject line podcast. Shoot me over some questions you'd like to hear me answer on these Ask April segments. I'm going to be taking some of the most common questions that I get from meeting with clients, but if there's something specific you would like me to cover, feel free to shoot me an email and I'll make sure that I put it on the docket. Thanks again for listening. I hope you guys enjoyed it and I will look forward to talking to you next time. Bye bye.
Voiceover: This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, you can visit our website at curryscheonfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address 3664 Coolidge Court, Tallahassee, Florida, zip code 32311. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member FINRA and SIPC. April is a financial representative of The Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.
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