Haider’s Hits: Summer 2023

6 Steps to Feel Financially Secure for Retirement

Hello and welcome to the Summer edition of Haider’s Hits – a seasonal blog post with timely insights to help you Invest with Clarity and Live with Purpose.

It’s summertime – The sun’s out and you’re about to leave for vacation! If you’re like me, whether it’s the beach or the mountains, you just can’t wait for that last day before your well-deserved break from the grind.

If you’re closer to retirement, it may even have you looking forward to that actual last day when you get to make every day Saturday. But then the longer you think about it, the scarier it might feel.

Not all of us have as much money as Jeff Bezos or Elon Musk so that we can spend whatever we want and never have to worry if there is enough.

Some have resorted to extreme saving and spending strategies that radically eliminate spending and maximize savings. The FIRE philosophy is one such philosophy. FIRE is an acronym for Financially Independent, Retire Early.

Their goal is to retire well before their 60’s by trading today’s luxuries and perks for financial independence. They may save 50% or even 70% of their income. FIRE savers are super-focused and max out every avenue of savings at their disposal.

Additionally, they take a radical approach to their expenses. They skimp on eating out and on summer vacations. Forget about streaming services or going out to the movies. All expenses are on the chopping block.

FIRE isn’t for everyone. Few folks can save 50% or more of their income – especially if you have kids or are saving for college. With increasing prices from inflation and it’s not uncommon for those who FIRE to eventually look to get rehired for extra income.

Now, we can certainly learn a lot from FIRE savers, but for the majority of people, it’s not feasible. And while you can aspire to make as much as the founders of Amazon or Tesla, you’ll most likely find yourself somewhere in between.

Whether you’ve saved at a more reasonable pace while enjoying some pleasures in life or if you’ve poured yourself into a business that you ultimately sold for a tidy sum, feeling financially secure going into retirement can be a perpetually burning ember in the back of your mind.

So – here are 6 steps to help you feel more financially secure heading into retirement.

1. Save 15% of your income in your company’s 401k. You can always ratchet up the savings slowly to hit 15% if you aren’t saving anything now. At the very least, capture your company’s match. It’s free money. Why leave any behind?
2. Set aside six months of expenses in an emergency fund. The last thing you want to do when you’re about to retire is be forced to take withdrawals from accounts that have already been drawn down 10-20% in a bear market. Even if you have ample investments, unforeseen withdrawals could severely impact the longevity of your portfolio. This is a critical and often overlooked key to feeling financially secure.
3. Get out debt. This includes student loans, credit cards and auto debt. Debt is a cash drain in your plan. You don’t want sinkholes in your financial plan. Whether or not to pay off your mortgage early requires a little more analysis and worth taking the time discuss in greater detail.
4. Max out IRA and HSA. Consider fully funding an IRA account and max out your health savings account if it’s offered as a part of your health coverage. HSA savings may be used later to pay for premiums on a Medicare supplemental plan.
5. Are you 50 or older? If so, consider catch-up contributions for retirement savings. You can save an additional $1,000/yr in your IRA and an additional $7,500/yr in your 401(k) if you’re eligible.
6. Diversify within asset classes and among asset classes. You want the overall mix of your investments to reflect the level of risk you are willing and can afford to take. The closer you are to retirement, the less volatility you will want to endure. Have multiple types of investments to dial in the right risk/return profile for you.

There are no easy roads, but a disciplined approach that emphasizes consistent savings, a modest lifestyle based on your income, and minimal debt will serve you well as you travel the road toward financial security and retirement.

If you have found this informative, please remember to pass this along to your friends and family. You can also check out my Facebook and Instagram page for more helpful tidbits.

Thanks for joining me today and I look forward to sharing more in the next edition of Haider’s Hits.