Navigating the path to a comfortable retirement can often feel like sailing through uncharted waters, with many of us wondering if we’ve saved enough to enjoy the fruits of our lifelong labour without the fear of financial scarcity.
Here are 10 signs that suggest you’ll retire richer than you think, ensuring your golden years are as golden as they should be.
You’re not chasing luxury at every turn
Retirement can be a time of indulgence, but if you find yourself content without splurging on luxury items or extravagant experiences all the time, this is a positive sign. It indicates a level of financial discipline that will serve you well in the long run.
You seek out financial advice
Meeting with a financial adviser for comprehensive planning, not just investment advice, can provide clarity and confidence in your financial trajectory. A good adviser will help you understand the trade-offs and ensure you’re living within your means, which is essential for a worry-free retirement.
You have an emergency fund
Emergencies do crop up. But don’t let emergencies eat into your retirement funds. Having an emergency fund is a proactive step towards securing your finances. A sizeable emergency fund, equal to at least six months of your living expenses, ensures that you are adequately prepared to deal with emergencies without sacrificing your regular living expenses.
You avoid impulsive purchases
A key sign that you’ll have financial security in retirement is the absence of expensive, impulsive purchases. If you aren’t excessively indulging in luxury items or expensive vacations, then you are managing your finances wisely. It is important not to chase trends that might lead to overindulgence.
You do not financially support others unnecessarily
If you have adult children who are dependent on you for their living expenses, this can massively strain your retirement savings. Encouraging their financial independence is crucial for both parties. If you have successfully guided them toward self-sufficiency, it reflects positively on both your relationships and your long-term financial goals.
You have a sensible budget
A disciplined approach to budgeting is a reliable sign that you won’t run out of money in retirement. If you have developed and strictly adhered to a sensible budget, it shows your financial responsibility and future planning. It is important to regularly review and adjust your financial plan based on current requirements.
If you are in any kind of debt, especially high-interest debt, managing and reducing it is imperative. If possible, try to pay off any mortgages and loans before retiring to ensure that a substantial chunk of your income isn’t going towards debt repayments.
You know your withdrawal rate
Awareness of your retirement fund withdrawal rate is a good sign of financial literacy. Sticking to a sustainable rate, typically around 4 per cent for a diversified portfolio, will help your savings last throughout your retirement.
You’ve had to cut back before
Have you ever had to cut back on expenses due to life’s curveballs? “I hear from a lot of clients that they can easily cut back in the future and live on less if they need to, but that is much easier said than done,” says Carla Adams, CFP, founder and financial adviser at Ametrine Wealth.
If you’ve proven you can live on less and still be content, you’re well-equipped to handle the financial ebbs and flows of retirement. This adaptability is a significant asset, according to Ms Adams.
“If you have experienced unemployment, pay cuts or other life circumstances that have pushed you to trim your spending and you’ve actually done so, then that is huge,” she says. “During retirement, being able to reduce your spending in down markets can go a long way in helping you sustain your portfolio for the long term.”
You have diverse income streams
Don’t put all your eggs in one basket. Jenna Biancavilla, principal at Pearl Capital Management, recommends having multiple income sources in retirement, such as superannuation, rental income, pensions and investments. This diversification helps mitigate risks and ensures financial stability.
Your investment allocation matches your time horizon
Ensuring that your investments are allocated appropriately for your time horizon is key. You should invest money that you won’t need for 10 or more years differently to funds you’ll need in the short term. A well-diversified portfolio balances risk and can provide steady returns.
Remember, it’s never too late to make adjustments that can significantly impact your retirement comfort. Whether it’s seeking advice from a financial planner, reassessing your budget or exploring new income streams, every step you take now is a step towards a more secure and enjoyable retirement.
What do you think of these signs? Are there any others you would add to the list? Let us know in the comments section below.
Also read: Working out how much to spend in retirement
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