By Tom Sedoric and Casey Snyder

It’s 2021—the summer to remember. Your calendar is booked, and you’re busy catching up on a year or more of social engagements. Most summers are busy, but this one particularly so, making it the perfect analogy for the importance of saving for retirement. 

Stay with us for a moment here. Your summer plans are made months in advance, scheduling vacations, beach days, and family barbecues. If you live in New England like us, it’s even more critical to squeeze every beautiful second out of the summer months before the harsh winter cold sets in again. Why should you treat saving for retirement any differently? Like summer vacation, retirement requires thoughtful planning and preparation in order to reap the benefits of your years of hard work.

Save Early, and Save Often 

It’s never too early to start saving for retirement—compound interest is your best friend when it comes to your retirement plans. For that reason, starting early in your career versus waiting until your thirties can make a huge difference on your nest egg as you enter retirement. It’s the same philosophy that drives booking plane tickets ahead of time in order to take advantage of the best deals. The early bird gets the worm, so to speak… 

That said, all hope is not lost if you happen to start saving for retirement later in life.

For those who begin their retirement savings later down the road, it’s important to be diligent about sticking to the plan. Without the advantage of extra years of compounded interest, it’s critical to maximize your savings each month. Morgan Housel, the author of “The Psychology of Money,” said, "The first idea—simple, but easy to overlook—is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate." Saving at a higher rate later on in your life can help you bridge the gap, so to speak. 

Practice Tax Efficiency

The way you build your nest egg matters quite a bit when you enter retirement. Distributing your investment across pre-, post-, and tax-free accounts gives you the greatest defense against shifts in the market and enables you to maximize your return. We’ve hammered home the importance of tax-efficient investing many times, but it’s worth reiterating—taxes are, after all, the greatest expense of your lifetime.

Tax policy will change with time, and just like needing a backup plan for rainy days in the summer, you need to be prepared for the inevitable policy shifts that have the potential to greatly impact your financial stability. 

Define Your Wants and Needs 

When planning your summer, the first thing you probably do is talk about what you want and need to do during those months. Retirement planning looks quite similar to that process. One of the first things we do when we sit down with a new client is discuss their needs, wants, and wishes in retirement to understand what a successful retirement looks like to them.  

From there, we help clients prioritize with respect to their projected retirement income. Needs and wants can vary greatly depending on the person, so it’s critical that spouses align their expectations well before retirement to avoid potential disaster. Perhaps one spouse expects to take three vacations a year during retirement, but the other would rather buy a vacation home and travel less frequently. Sorting out these kinds of differences in opinion can help couples avoid overspending their way into financial disaster. 

It’s also important to critically evaluate how your desired retirement lifestyle will impact your chances of success. The Sedoric Group carefully analyzes how certain decisions, such as length of retirement or lifestyle choices, impact the probability of a successful retirement. We aim for an 85-90% confidence level for success, which gives padding room for unforeseen circumstances.  

As with anything worth doing, retirement planning takes time and effort to get right. But, it pays off in the end. Just as you’d plan your summer—making dining reservations, booking time off, and researching the best beaches to visit—your retirement planning deserves thoughtful consideration.

This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. Raymond James and its advisors do not provide tax or legal advice. You should discuss tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. No investment strategy can guarantee your objectives will be met. The projections or other information generated by investment planning software regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.