Retirement

Key Traits of Successful Retirees

While not everyone is ready for retirement, some older Americans are doing very well. Discover the traits shared by successful retirees.

According to a survey of more than 2,500 people by investment firm T. Rowe Price who have 401(k) plans and/or Individual Retirement Accounts (IRAs), the most important factors contributing to a stable retirement are:

  • Flexible spending habits
  • Significant savings
  • Income from second job

Adopting these three traits for your retirement can give you a more secure future.

1. Be flexible with your spending.

According to a T. Rowe Price study, most retirees exhibit flexible spending habits. Three out of 5 will adjust their spending up and down based on the market to maintain the same level of spending year after year, rather than maintaining the value of their savings and investments, potentially making their portfolios more volatile. There is a risk of decreasing.

Being flexible with spending before and during retirement is “absolutely key,” says Jon R. King, a certified financial planner with Pegasus Financial Solutions, LLC in Austin, Texas.

“Spending before retirement is important because the less you spend, the more you save,” he says. “Retirement reduces expenses. [your money] Stay late, walk late.”

To test how much spending affects retirement income, King often runs a “what-if” scenario. In one case, he increased the couple’s expenses by $10,000 per year and made some estimates. Both clients were in their early 50s, so the extra costs started then. With this increase, King found that the couple would run out of money at age 93, as opposed to having a surplus of $2 million at age 97.

“They were saving a high percentage of salary, but the $10,000 in extra expenses dropped the savings rate substantially,” he says.

While every case is different, and this may not be a general result, it does show how spending habits can affect retirement savings.

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2. Save appropriately – Save early and often and catch up if you’re behind

Spending goes hand in hand with saving, King says, because “your spending really determines how much you can save.”

“The three most powerful factors in financial planning are being aware of how much you’re spending, knowing that you also have to save, and knowing how quickly you can save,” says Geoffrey Bogue, a certified financial planner in Wales. The more you save, the better,” says Jeffrey Bogue, a certified financial planner with Wells, Maine-based Bogue Asset Management. “Everything else starts to fall into line after that.”

T. Rowe Price reports that many retirees with 401(k)s and IRAs have substantial savings, with 48% having $500,000 in household assets (investable assets plus home equity, minus Debt).

Although the amount of money people need to save for retirement is determined on a case-by-case basis, there are some things everyone can do to take steps toward building a solid retirement plan.

Segregating their savings accounts can keep retirees on track to make sure their spending patterns aren’t interfering with their savings, Bogue says.

Different savings accounts or “buckets” should represent short-, medium-, and long-term commitments or goals. For example:

  • An account holds money for prepayments, including mortgages and other bills.
  • A second is saving for medium- and long-term goals, like buying a car or taking a vacation. This bucket includes retirement accounts, such as 401(k) plans.
  • The third is “in between” – the 7-14 day cash flow bucket for everyday expenses on things like gas, groceries, and recreational activities.

“It gets everyone’s ducks in a row,” Bogue says. “It’s a lot better than just saying, ‘OK, let’s do a budget,’ and at the end of the month saying, ‘Did I win or lose?’

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3. Working – Retirement Jobs

Sometimes adjusting spending habits or making savings plans isn’t enough to get people to a comfortable place in retirement. In these cases, many people look to part-time or even full-time work to provide some extra income.

“Retirement isn’t necessarily a decision to work or not to work. It’s a decision to work on your own terms,” ​​Bogue says.

About one-fifth (21%) of T. Rowe Price survey respondents have retired but returned to work part-time or full-time, while another 14% are looking for work.

“I think you’re going to see more and more of that because there’s going to be a lot of people who think they need as much of a cushion when they retire,” King says. “When you take on a part-time job, sometimes it creates a plan that wouldn’t have happened otherwise.”

Other factors that contribute to a secure retirement plan

In addition to spending less, saving more and being open to working or working more during retirement, there are other traits that can help retirees create a secure retirement.

In its survey, T. Rowe Price found:

  • Nearly half (48%) of retirees indicated they had a withdrawal plan, and the median retirement withdrawal among them was 4% of their net worth within the past year.
  • Retirees report living on an average of only 66% of their pre-retirement income, which is less than the 70%-80% that some financial planners and investment firms recommend that people spend in retirement. Keep this in mind when planning.

While everyone’s needs and wants are different, all of these features can help point pre-retirees and retirees in the right direction.

“They’re all connected. Definitely save more and spend less — that’s the key to the whole thing,” says King. “Set a goal and know how much money you’ll need to save before you retire to achieve the lifestyle you want.”

Take action today.

What can help develop the traits described above? Create and maintain a comprehensive financial plan.

Use the new retirement planner to take financial wellness into your own hands.


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