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September 2023 - A Good Plan is Essential for a Great Retirement

September 2023 - A Good Plan is Essential for a Great Retirement

September 11, 2023

I recently watched a documentary on the Titanic.  It was produced around the 100-year anniversary of that tragic night the ship struck an iceberg and sank to the bottom of the ocean. So many things went wrong on that fateful night but what struck me was that the lack of preparedness compounded the tragedy as well as the loss of human lives. The crew was never properly trained on how to load the boats or how many people could fit on each boat, the evacuation drill scheduled the day before was cancelled, only half as many lifeboats as passengers were on the boat, and the list goes on.

 Although that illustration might seem overly dramatic, I wanted to draw a parallel to the importance of proper planning for retirement. Many people head into retirement without having a well laid out plan and it could be a costly mistake. Benjamin Franklin once said, “If you fail to plan, you plan to fail.” Most people will spend between 25-30% of their life in retirement. Think about that for a minute. You will likely spend almost a third of your life in retirement yet a recent survey, reported in the July 2022 issue of Fortune magazine, found that 55% of adults ages 26-41 spend more time planning for vacations than for their retirement.

The challenging part of that statistic is that the earlier you start developing a plan and purposefully saving for your retirement the higher your likelihood of successfully achieving your retirement goals. That is one of the reasons why, as part of the relationship with our clients, we spend so much time talking about and preparing your financial plan and then reviewing and updating it at least annually to make sure it is still accurate, and you are still on track. Motivational speaker Zig Ziglar once said, “You can’t hit a target you cannot see, and you cannot see a target you do not have.”

This is also why it is so important to talk to your kids and grandkids about starting to save and invest early so that they have time and compounding on their side. Do you want to leave a great legacy for them? One way is to help them understand the importance of fiscal responsibility and saving a portion of what they earn at a young age. Another way is to open and help them fund a Roth IRA each year that they have earned income. You can gift them money or match what they put into their Roth. The current maximum contribution for individuals was just raised to $6,500/year. If they were to fully fund a Roth each year starting at age 20 they would have almost 1.5 million dollars by age 65, assuming a 6% rate or return.  The best part of that is they will never pay taxes on any of that as long if they follow the guidelines for a Roth IRA. They most likely won’t fully appreciate the incredible benefit of tax-free growth until they have had a lifetime of paying taxes.

It is hard to emphasize this enough, but a Roth IRA is truly one of the best investment vehicles you can have for accumulating part of your retirement nest egg as well as one of the best gifts you can give to a young person who is just starting to work outside of the home.

I also wanted to remind you about the monthly educational webinars we host. They cover a variety of topics and many of our clients find them very helpful. The September webinar is on Medicare and is scheduled for Wednesday, September 20th from 12-1 pm. If you are unable to attend you can find a link on our website under the “Wealth Strategies” tab to a recording of the webinar a couple of weeks after the scheduled date. You can also find many other great topics from previous months such as information on Social Security, Roth IRA Planning, Trust Services and more.

Every day is a gift, start it with a grateful heart,

Kurt, Jean, Anders & Molly