Most Americans do not have enough retirement savings. Morningstar reported that up to 58% of Americans will be unable to maintain their standard of living when they reach their retirement years. That’s obviously problematic. No one wants a major downgrade to their living standards during a time period when they should be enjoying life and reaping the benefits of a lifetime of work.
The good news, though, is that there are some Americans who are doing the right things when it comes to investing for the future. And, many of those Americans have one particular habit in common.
In fact, there’s a specific factor that ends up doubling the amount of retirement savings that Americans have — and it’s not being really great at selecting stocks and making a ton of money on investments.
Here’s what the key factor is that makes all the difference in helping set Americans on the path to financial security in their senior years.
This factor doubles the amount of retirement savings Americans have
The factor that doubles the amount of retirement savings in Americans’ investment accounts is not a surprise when you look at the details. According to Northwestern Mutual’s annual study, called The Planning and Progress Study, the thing that makes all the difference is working with a financial advisor.
The Northwestern Mutual survey revealed that:
- Americans who are working with a financial advisor have an estimated retirement age of 64, which is two years earlier than the age Americans without an advisor plan to retire (age 66).
- Americans who are working with a financial advisor have saved $132,000 versus $62000, which is twice as much.
- Americans who are working with a financial advisor feel significantly more confident both in their ability to achieve their financial goals and in their belief that they are going to achieve those goals faster than their peers.
Of course, this makes good sense. Planning for retirement is a complicated process that requires making careful decisions about things like how much to invest and what to invest in. It also involves making a comprehensive plan to turn goals into reality. And, you’ll often need a good amount of knowledge to make these plans, as well as a big-picture understanding of your finances so you can see where your weak points are and overcome them.
An advisor has the knowledge you need to take care of key retirement planning tasks, while if you try to go it alone, you may not even know where to start… or you may miss out on some of the fundamentals of retirement savings, like figuring out which tax-advantaged plan to use to invest and why.
It’s worth getting a financial advisor if a secure retirement is important to you
Saving a good amount of money for retirement requires a lot of things to go right. You need to:
- Decide how much to invest for your future
- Create a budget that allows you to invest the appropriate amount
- Choose the right tax-advantaged account(s) to get a little extra help in hitting your investment goals
- Decide what to invest in that allows you to limit risk and maximize returns
- Understand the role Social Security will play in your retirement
- Follow through on your savings and investing plans
- Rebalance your portfolio as needed to maintain the right asset allocation
- Choose a safe withdrawal rate
And this is just the start of the tasks to check off your to-do list. An advisor can help with all of these steps and more, so you can turn your retirement dreams into actual reality.
You should look for an advisor with a solid reputation, who ideally charges on a fee-only basis instead of charging a percentage of assets under management, and who has a fiduciary duty to look out for your best interests. If you can get the right advice, you can hopefully be one of those Americans with retirement account balances significantly larger than those of your peers.
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