While the concept of “effort is more important than the results” may be an important lesson for young children struggling in school or sports to learn, there are times when the final product is important, regardless of how much effort you put in. One of those times is saving for retirement.
Sometimes trying hard isn’t enough
An “A for effort” won’t guarantee a sizeable nest egg when it comes to retirement savings. Since even the best laid savings plans can be derailed by any number of “emergencies,” it may be wise to put your savings on autopilot to make sure you don’t miss even one month. There are no second chances when it comes to retirement planning.
Even more sobering is the fact that the opportunities to correct mistakes lessen as retirement approaches.
The biggest retirement planning mistake is not having a plan. Studies show that the majority of workers haven’t attempted to calculate their retirement needs. Other studies show that once a target number for savings is known, the chances of achieving that goal improve dramatically.
Vacation versus retirement
Are you amongst the people who spend more time planning their vacation than their retirement? If so, take a minute… or several hours… to think about your retirement needs and what concrete steps you have taken, or can take, to get there.
It’s not enough to calculate how much money you’ll need; make sure you set up automatic withdrawals from your checking account into a separate retirement account. Then, you must review the asset allocation and performance on a regular basis, and make adjustments if necessary.
While having a pension plan is great, keep in mind that the terms of pension plans can unexpectedly change. Having a fully funded nest egg can minimize the negative implications of any surprises when you actually begin receiving pension benefits. (Remember the recent story of Maariv employees only receiving a fraction of their anticipated pitzuim?)
Dreaming about retiring in style is nice and optimistic, but remember, you only get one chance at retirement. Retirement planning is one case where the efforts aren’t good enough; the final results (your net worth) matters. Making the effort is the first step, but savings, planning, and reprioritizing are other necessary steps on the path to a secure retirement.
For more help in retirement planning and to maximize your dollar investments to meet your goals, download a free copy of The Retirement Planning Book.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published October 28, 2012. Updated August 2019.