Perhaps you’ve heard the phrase “If you aim at nothing, you’ll hit it every time.” It’s a reminder that goals and focus are important or you’ll never achieve anything significant. That’s especially true when it comes to planning for retirement. You need a goal. You need to know your R:IQ—the amount of money you’ll need to live out your retirement dreams.
But that’s just part of the formula for success. It’s just as important to focus on the actions that will get you to that magic number. But you can’t move forward until you know what you can control (or can’t control) when it comes to retirement savings and planning.
Things You Can’t Control
Some elements in a retirement plan are beyond your control. You can’t predict, change or influence them. Trying to alter them will only leave you frustrated:
1. The Market
As much as we’d like, none of us can control how the stock market performs. That may cause some anxiety for people who forget one important thing: in the long haul, the stock market goes up. Your stocks will make money—if you’re patient and don’t panic.
2. The Unexpected
Life happens, good and bad. You can’t pick and choose what comes your way. For instance, you may retire before you had expected or wanted to. That’s why it’s so important to start saving as much as you can as soon as you can. Then, you’re better prepared for the unexpected.
Inflation is the increase in prices. That’s why cars cost more than they did in 2000. And things will cost more in the future than they do now. That’s why you need to be investing at a rate that’s higher than inflation. Your money won’t be worth as much in the future, so you’ll need more of it.
4. Social Security
You don’t know how much you’ll get at retirement because the laws around Social Security are constantly changing. Think of this money as icing on the cake. It’ll be nice to have, but you can’t count it as the base of your retirement income.
Things You Control
Despite the factors you can’t control, there’s still a lot you can control. The goal is to focus on those things and make sure you’re doing what you can to maximize your retirement saving options. These are the things to pay attention to:
1. Saving Amounts
How much you put away for your retirement is entirely in your control. You can decide to put away 5% a month or 35% a month! If you want to make real progress in saving for your dream, you’ll need to make some sacrifices to get there. You can’t save a small percentage of your income now and expect a great retirement later.
2. Your Spending
Listen up: Too many people blow their money on fancy coffee and expensive clothes when they should be putting that money away for retirement! I can’t imagine telling my kids that I have to live with them in my old age because I wasted my money on a $300 pair of jeans or a $500 phone. Remember that the next time you’re tempted to splurge.
3. When You Start Saving
Sometimes people tell me they’ll get serious about retirement later—after they turn 30, after they get married, after they pay for kids’ education, after the economy recovers. When you wait, you lose precious time. And time is money when compound interest is in the picture! Save early and keep saving.
4. Your Portfolio
You get to decide what you invest in. I always recommend mutual funds because they minimize some of the risk if one market segment (like overseas markets or small cap funds) isn’t doing well. If you don’t feel like you control what’s in your investment portfolio, then find an investing professional who will help you reach your retirement goals.
You control one other element that can make or break your retirement savings: your attention. If you don’t stay laser-focused on that dream retirement, you’re likely to get off track with your budgeting, spending and saving. On the other hand, if you keep your eye on the prize—your retirement dream—and the factors you control, you’ll be enjoying that new chapter of your life before you know it!