If you’re spending money on your children’s college education rather than padding your nest egg for your golden years, not so fast, one expert said.
“One of the mistakes people make is they spend too much money on their children without saving for their own retirement,” said Darren Zagarola, senior wealth advisor at EKS Associates, a financial firm. “Remember, you can borrow for education. You can't borrow for retirement.”
Retirees tend to overestimate their time horizon for retirement and therefore prioritize others' needs before their own, Zagarola said, until they realize time is running out.
“In their 50s, they still think retirement is so far off, but it’s not,” Zagarola said. “It’s 10, 15 years around the corner.”
Those caught short on retirement savings have to rethink their golden years. More than half of Baby Boomers admit that even in retirement, they’d consider looking for another job to make ends meet, according to a survey by TD Ameritrade, a financial firm.
“So people really need to start thinking as they get into their 50s what they want retirement to look like to them, what their life is going to be like,” Zagarola said. “Because then, they can set their goals and adjust their financial plan moving forward.”
For those near-retirees who may aren’t confident in catching up, Zagarola said it’s never too late to get back on track with your retirement goals.
“They're afraid to plan forward,” Zagarola said, “but they think it's too late to start a plan if they haven't already done it.”
‘The first thing is to really understand your income’
If you’re confused whether you're on track for retirement or not, Zagarola said to take a closer look at your annual income.
“So the first thing is to really understand what your income is and your expenses are, so that you can formulate a savings plan that will allow you to take some of that excess cash that you have and invest it,” Zagarola said. “Make sure you’re maxed out on your retirement account using whatever matching you may have from the company.”
He also cautioned readers to not get too conservative in their portfolio and to instead consider inflation in their investment strategy.
“Remember when you get to retirement, that’s just the beginning of the next stage of life,” Zagarola said. “It’s not the end. You’re still planning for 20 to 25 more years.”
Like any good household budget, you want your expenses to be below your income.
“Now that you're getting a larger amount of disposable income because your income may be higher, don't increase your expenses along with your new lifestyle of being with no children,” Zagarola said. “You want to be able to save that excess cash flow.”