I haven’t had a salary increase in a decade!  This is a common reflection from those in the middle-aged group who are beginning to picture their life in retirement.  They remain in their jobs often because they enjoy the work or they have established a satisfying level of life and work balance.  Modest salary increases, often simply a cost-of-living amount, have been consumed by increasing health and pension benefit costs.  On self-reflection – they wonder if they are financially ready to retire.  Even so many remain resistant to formal financial planning.  The reality is that some people will never have a written financial plan.  Some will remain uninterested, others do not have asset levels that are attractive to professional financial planners and simple math reveals that there are not enough certified financial planners to provide this service for everyone who is interested in formal planning.

Those without a planner may want to consider these perspectives:

  1. Are increasing pension costs chewing into your salary increases?  If so, this could mean a positive financial direction for your future retirement.  Paying more now into defined benefit (DB) or defined contribution (DC) plans should pay off in future years.  Remember that you are carrying the investment risk in DC plans so pay attention to your investment choices.  Maximize your DB contributions.
  2. Have your expenses continued to grow even though your salary has not?  If so, are these expenses temporary (such as minor-aged children) or are these lifestyle expenses (such as exotic travel) and therefore you are living beyond your means?  Those who are supporting dependent children are likely to find that their ability to live on less while they raise their children will mean a comfortable retirement because their expenses will be considerably lower post-child-launch.  Those who are big spenders today are more likely to have retirement cash flow issues and are at greater risk of running out of money in their later years.
  3. Are you within five years of retirement and still carrying mortgage debt?  Today’s low interest rate environment means that mortgages are an attractive option for managing your money because investments are likely to perform better than your mortgage rate.  However, a prudent approach to preparing for retirement would be to live with the income level you will have in retirement, test your ability to save the rest of your income, and eliminate all debt.  This five year preparatory period will help you to confirm that you are retirement-ready – before you close down your employment options.  By the way, if you are carrying consumer debt such as credit cards, get rid of it now, even if you are not planning to retire within five years.  Otherwise the credit money pit will drag your finances down.

Let’s accept that it is impossible to get everyone with financial assets to do a formal retirement plan.  Unfortunately reality also demonstrates that many of those with a formal plan will avoid implementing the plan.  This means that some quick reality checks are needed to assess if you are financially sabotaging your retirement.  The results, if negative, will hopefully motivate you to find a financial professional to help get you on track.  By the way, don’t be embarrassed if you find yourself in financial trouble.  It happens to many of us, but an objective and caring financial professional can help you find an effective solution.

*image from Stux via Pixabay