Saving for retirement is no easy task. We’re quickly approaching the end of another year of our lives and that brings us all one year closer to retiring.
That’s why now is a perfect time to check and make sure you’re on track for retirement.
Here are a few yearly check up questions than can help you reach your retirement goals.
Are You Where Your Retirement Plan Says You Should Be?
Everyone should have a retirement plan. If you don’t, the first step is getting one. If you are responsible and have a plan, where does it say you should be this year?
There are two answers to the question, you’re either where you should be or you aren’t. While the answer may seem simple, the most important factor is knowing why your answer is what it is.
If you aren’t on target, is it because you aren’t contributing enough money or was there a recent market downturn?
Depending on how many years away from retirement you are, the answer to this question may require urgent action or waiting out the current downturn.
The key is to know where you are in relation to your goals and why you are where you are. Once you know that, you can formulate a new action plan to get back on track or continue with your retirement savings success.
Are You Happy With Your Savings Rate?
Your retirement savings rate is my favorite predictor of retirement savings success. The more you save as a percentage of your income, the less income you’ll need in retirement if you keep your lifestyle the same. Unfortunately, savings rate definitely isn’t the only factor in retirement success.
Even if you’re on track with your retirement plan, it may be because you got lucky this year with a major increase in your investment returns. If that is the case, the recent returns may not be what you’ll receive in the future and your savings rate may actually be too low.
You may want to look into increasing your savings rate so that you’ll stay on target with your retirement plan even when markets don’t perform as well in the future. There is no guarantee we’ll have amazing returns like we have had the last few years.
Did You Increase Your Contributions With Your Raise?
This is my favorite way to increase my retirement savings rate. Every year when I get a raise, I put half of my raise toward retirement savings. That means if I get a 2% raise at work this year, I’ll increase my retirement contributions by 1% of my total salary.
Some workplace retirement plans allow you to sign up for an automatic increase program. If your workplace offers this option, then you’ll definitely want to consider signing up.
Whenever processes, such as increasing your retirement savings rate, are automated there is a much more likely chance that the action will happen. You might not even notice the money missing from your checking account!
Whether you’re close to retirement or it is 40 years away, make sure you ask yourself these retirement savings check up questions every year. You’ll be glad you did!
Do you have any other retirement check up questions you ask yourself? I’d love to learn about how you do your yearly retirement checkup.
Image by: Ken Teegardin Text added by: Lance Cothern